100% state-backed loans for small businesses

Chancellor Rishi Sunak has announced a new 100% state-backed loan, offering businesses loans of up to £50,000, within days of applying.

Dubbed the "bounce back" loan, the new measures were announced following criticism that many businesses were struggling to access credit during the COVID-19 lockdown.

The new scheme is set to launch on Monday 4 May, with applicants required to complete a two-page self-certification form online.

There have been reports of the banks being slow and reluctant to lend to small and medium-sized businesses under the Coronavirus Business Interruption Loan Scheme (CBILS) because they are liable for 20% of the risk. The banks have said it is down to the heavy workload they are now under, the need to complete the necessary credit checks and a shortage of staff.

Chancellor Rishi Sunak said: "I've heard some calls for the government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case for doing that universally.

"We 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 and not necessarily because of the impact of the coronavirus".

Chairman of the Federation of Small Businesses, Mike Cherry, said it would "give hope to thousands" of firms.

"To date, the existing interruption loan scheme has not been working for the small firms that make up 99% of our business community.

"The decision by the chancellor to listen to our recommendation for a 100% guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands."