The Chancellor, Rishi Sunak made a statement to the House of Commons on the government’s economic response to the Coronavirus outbreak. The Chancellor confirmed that the Office of Budget Responsibility (OBR) has said that the Coronavirus will (not surprisingly) have significant negative impacts on the UK and global economy.
The most important announcement made by the Chancellor concerned the launch of the new Bounce Back Loans scheme. The launch of this scheme will help many small and micro businesses that appeared to have fallen through the cracks and were ineligible for most of the support measures that had previously been announced.
The new scheme will allow small businesses to borrow between £2,000 and £50,000 and access the cash, in most cases, within 24 hours of approval. The loans will have a 100% government guarantee and businesses can apply for a loan of up to 25% of their turnover. The government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time.
The Chancellor said that banks will not need to perform any forward-looking test of business viability or other complex eligibility criteria and that businesses will be able to apply for a loan online using a short and simple form. The new scheme will open for applications at 9am next Monday, 4 May, and firms will be able to access these loans through a network of accredited lenders.
The Chancellor has received many representations looking for the Coronavirus Business Interruption Loan Scheme (CBILS) to have a 100% government guarantees (rather than 80%) but resisted doing so saying he remained unconvinced that it was necessary to make such a move. However, many businesses are reporting difficulties accessing finance as banks are refusing to lend.
The Chancellor said:
‘Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis. This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.’
It was also confirmed that over 1.5 million new claims have been made for Universal Credit. More than 500,000 claims have been made for the job retention scheme since it was officially launched and over 4 million jobs have been furloughed. The Chancellor also suggested that, without government interventions to assist, a quarter of businesses may have stopped trading as a result of the Coronavirus pandemic.