A government-backed loan scheme to help Britain’s small businesses survive the coronavirus lockdown comes into effect on Monday, allowing firms such as hairdressing salons, coffee shops, and florists to receive emergency cash.
Finance minister Rishi Sunak, who previously opposed 100% state backing for commercial loans, announced the new facility on April 27, bowing to pressure to do more for the smallest companies after a previous scheme got off to a slow start.
The new “Bounce Back Loans” allow businesses including sole traders to borrow between 2,000 and 50,000 pounds for up to six years. The first year is interest-free for firms, after which they pay an interest rate of 2.5%.
Banks handling the loans will not be required to run credit checks or assess the long-term viability of applicants.
“Small businesses will play a key role creating jobs and securing economic growth as we recover from the coronavirus pandemic,” Sunak said in a statement to mark the first day when the Bounce Back scheme goes into operation.
“The Bounce Back loan scheme will make sure they get the finance they need – helping them bounce back and protect jobs,” he said.
Most British businesses have been shut to the public since March 23, when the government imposed social distancing measures to slow the spread of the virus. Government forecasters have said the economy could contract by 35% in the second quarter.
Britain last month announced an emergency 330 billion-pound credit scheme including loans of up to 5 million pounds for small and medium-sized companies, with state guarantees of 80%.
But many companies said they struggled to secure bank approvals, putting pressure on Sunak to provide full state guarantees for commercial loans to the smallest businesses.
From Monday, any firm that has already taken out a loan of 50,000 pounds or less under the 80%-state-backed scheme can apply to have it switched over to the Bounce Back scheme.