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Government’s latest loan scheme ‘could be saviour of businesses crushed by crisis’

PUBLISHED: 00:23 02 May 2020

The government's CBILS loan scheme has proved a real headache for some firms, but Bounce Back may provide the help they need  Picture: MACTRUNK

The government's CBILS loan scheme has proved a real headache for some firms, but Bounce Back may provide the help they need Picture: MACTRUNK

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A government loan scheme aimed at helping small businesses to bounce back could be vital in helping them to emerge from the coronavirus crisis, a finance expert believes.

Sam Grimmer, of Lovewell Blake  Picture: NEWMAN ASSOCIATES PRSam Grimmer, of Lovewell Blake Picture: NEWMAN ASSOCIATES PR

With around a quarter of Britain’s businesses believed not to be trading at the moment, chancellor Rishi Sunak’s ‘Bounce Back’ loan scheme might make all the difference, said Sam Grimmer of East Anglian accountancy firm Lovewell Blake.

With just 16,000 loans issued under the government’s Coronavirus Business Interruption Loan Scheme (CBILS), a simple, easy-to-access and affordable loans scheme for small firms was very much needed, he said.

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The much-criticised CBILS only offered an 80% government-backed guarantee to lenders, which consequently saw banks implementing their standard stringent application processes.

However, Mr Sunak’s ‘Bounce Back’ loan scheme offers a 100% guarantee – and, crucially, will not require a forward viability test to access, he said.

“This means that businesses will not have to produce cashflow forecasts to apply, a key stumbling block to other schemes. Instead, the loans will be accessed via a short, standardised online application, which means that many more applications will be approved – and funds should reach businesses within days,” he said.

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Only businesses which were an ‘undertaking in difficulty’ on December 31, 2019, will be refused a loan. “Quite what this means has not yet been explained, but in practice it seems clear that most applications will be successful,” said Mr Grimmer.

Small firms can borrow between £2,000 and £50,000, capped at 25% of turnover, with no interest or loan repayments in the first year.

“We are promised that government will work with lenders to agree a low rate of interest for the remaining period of the loan, although what that figure will be is not yet clear,” he said.

“When we approach an easing of lockdown, many of those small businesses which are not trading, or which are trading far below capacity, will need funds to start up again, whether for stock, marketing, or simply to cover regular outgoings.”

The announcement of the scheme was “timely”, and showed the chancellor was listening to concerns raised, he said.

The scheme is open for applications from Monday, May 4. The government is due to review lockdown restrictions on May 7.

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