Small business gets 100% state-backed loan lifeline<\/p>\n<\/p>\n
The Bounce Back Loan Scheme<\/a> will enable small businesses affected by the pandemic to borrow between \u00a32,000 and \u00a350,000 in an initiative described by the Chancellor as \u201can easy solution for those in need of smaller loans\u201d.<\/p>\n Sunak assured the House of Commons on Monday that businesses will only need to apply through a short, standardised online application and\u00a0will get the loans within 24 hours of approval.<\/p>\n \u201cThere will be no forward-looking tests of business viability; no complex eligibility criteria; just a simple, quick, standard form for businesses to fill in,\u201d said Sunak. \u00a0<\/p>\n Businesses can apply for 25% of their turnover\u00a0and the government will pay the interest for the first 12 months.<\/p>\n Much to chagrin of businesses\u00a0and accountants who have cried out for the government to underwrite CBILS, Sunak \u201cremains unconvinced\u201d and doesn\u2019t think it is \u201cappropriate\u201d to provide blanket 100% guarantees.<\/p>\n Sunak highlighted how the \u00a350,000 cap would reduce the risk to the taxpayer while\u00a0still helping the smallest businesses.\u00a0\u201cWe should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back \u2013 and not necessarily because of the impact of coronavirus,\u201d he told the Commons.<\/p>\n Amongst other gripes, accountants and businesses have criticised banks for being slow to approve CBIL applications<\/a> and being too complex. \u00a0<\/p>\n However, the government is exploring other avenues to speed up the CBILS applications process. These additional steps include removing the per lender portfolio cap for the government guarantee and changing the viability tests \u2013 banks will just need to know if the business was viable before the pandemic.<\/p>\n The chair of the Treasury Committee Mel Stride said the success of the new scheme depends on the actions of lenders:\u00a0\u201cIt is essential, therefore, that there is full and regular transparency on the progress of this scheme in order to get this further vital lending out the door fast.\u201d<\/p>\n The Bounce Bank loan scheme joins other government initiatives for coronavirus-hit businesses, such as the existing Coronavirus Business Interruption Loan Scheme<\/a> (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).<\/p>\n But as AccountingWEB member\u00a0Ireallyshouldknowthisbut…<\/a>\u00a0discovered when investigating the application form<\/a>, businesses will be unable to claim if they have an existing loan. There is also no reference to any personal liability.<\/p>\n \u201cIf there isnt any, then it will be \u2018free money\u2019 if you are going down the tubes,\u201d they noted.<\/p>\n Responses to the new Bounce Back scheme have been positive. Mike Cherry, the chairman of the Federation of Small Businesses, deemed the \u201ccrucial new initiative\u201d a \u201cdecisive intervention from the Treasury and Business department\u201d, but added that \u201cswift delivery is now key\u201d. \u00a0<\/p>\n CBI Director-General Dame Carolyn Fairbairn\u00a0ramped up the pressure on banks:\u00a0\u201cThousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster.\u201d<\/p>\n