A new government-backed business loan scheme has been launched to give small businesses affected by Coronavirus disruption a helping hand to get back on their feet.
The new Bounce Back Loan scheme went live today with the goal of helping the UK's smaller businesses and sole traders get back on their feet after the Coronavirus lockdown lifts. The government has promised that these loans will be easier to apply for and banks will offer them on much looser affordability terms than are applied to their standard commercial business loans.
The loans can provide between £2,000 and £50,000 to any business that was trading on March 1st and was not in financial difficulty before that date. Repayment of the loan will begin 12 months after it's taken out, the repayment term can be up to six years, and all lenders must then charge a flat 2.5% interest rate.
The UK government's approach to supporting businesses during the Coronavirus lockdown has been criticised for falling short of the needs of small businesses and leaving early-stage startups to fend for themselves. Grants of £10,000 were given to the smallest businesses but only those that pay rates, leaving thousands of tech startups based in managed office spaces and innovation hubs without any support.
Government-backed coronavirus business interruption loans have been made available for firms willing and able to take on debt to get through the crisis, but banks have been reluctant to give out the loans. The government is guaranteeing only 80% of the debt on these loans and they aren't suitable for many start-ups that won't have a lot of assets or a financial track record.
In contrast, banks are reportedly being much more liberal with the new Bounce Back Loans as the government is backing 100% of the loan value if the firm defaults.
Source: BBC News
