Coronavirus: New business loan scheme opens for small companies
4 May 2020, 08:23 | Updated: 4 May 2020, 10:00
Small companies who need financial help through the coronavirus crisis can apply for a new business loan scheme from 9am this morning.
Up to £50,000, or a quarter of turnover, will be available to firms through the "bounce back" scheme which was announced by Chancellor Rishi Sunak last month amid the Covid-19 pandemic.
The loans will be 100 per cent backed by the government and will be both interest-free and payment-free for the first 12 months. Once approved, they should be in the company's bank account within 24 hours.
After the first year, the interest rate will be set at 2.5 per cent per annum, the Treasury said.
Companies will be able to access a standardised form from 9am on Monday morning which is hoped to speed up payments.
When announcing the scheme in the House of Commons, Mr Sunak described the process as "simple, quick and easy."
However, there have been concerns raised over fraud because of the minimal checks being carried out in the process.
Some companies who were approved for loans under the Coronavirus Business Interruption Loan Scheme could be switched over to the "bounce back" scheme, Chief Secretary to the Treasury Stephen Barclay said last week.
Meanwhile, the chancellor has been urged to introduce a "wage subsidy package" to taper furlough payments when lockdown measures are eased and businesses begin to recover.
The Liberal Democrats have suggested the Treasury pays 50 per cent of employees' salaries on the Job Retention Scheme in the first month after they have returned to work.
Last Monday I announced Bounce Back Loans, today they open for business.— Rishi Sunak #StayHomeSaveLives (@RishiSunak) May 4, 2020
✅Borrow between £2,000 and £50,000
✅Easy 7 question form to fill
✅Interest-free first year
✅Repay over 6 years, 2.5% interest rate, no early penaltyhttps://t.co/5c52bOZE8z #BounceBackLoans pic.twitter.com/UzGAzjJIgx
By the third month back in work, the government would pay 30 per cent of their salaries, under the proposals, but then companies would be expected to pay the full wages by the fourth month.
The Lib Dems say firms could struggle to have the cash flow to pay employees' full salaries and they worry that employers will choose to hand our redundancies as an alternative.
Under the government's Job Retention Scheme, which is due to run until the end of June, the Treasury pays 80 per cent of wages of workers laid off because of the current crisis, up to a maximum of £2,500 a month.
Acting Lib Dem leader Sir Ed Davey said: "The government furlough scheme has done a good job at helping thousands of businesses through the lockdown, but the shadow of lockdown will be long, and the 'new normal' will be extremely challenging.
"Businesses and their staff need time to plan, and confidence the government will be there, ready to support.
"Our proposal for a 'Safe to Return to Work' scheme would give people that time and that confidence and help avoid further large-scale job losses.
"I'm grateful to my new business taskforce for this idea and all their advice for our proposals to government for reforming business loans and improving support for start-ups."
Juergen Maier, chairman of the Lib Dem coronavirus business taskforce and former chief executive of Siemens UK, added: "The advisory group are concerned that once the furlough scheme comes to an end, many businesses, large and small, will simply not have the cashflow to re-employ staff, as it will take time for the economy to recover.
"If firms then were forced to make staff redundant, leading to another significant rise in unemployment, that could break the economy's ability to recover, just as we were trying to exit lockdown.
"I'm delighted that Ed and the Liberal Democrats are running with our recommendation, and I hope ministers will see it as a positive and constructive contribution."