COVID-19: Small firms offered loans of up to £50,000, backed by Government

The chancellor has announced a new coronavirus crisis aid scheme, offering small businesses up to £50,000 in loans, which will be 100% guaranteed by the government.

Key points:

• Businesses will be able to apply to borrow 25% of their turnover, up to a maximum of £50,000
• Government will pay the interest for the first 12 months
• The microloan scheme will be in place from Monday 4^th May 2020
• Requests will need to be made through your own bank
• Applications will be made via a simple two page form
• Applicants will not face a viability test
• Some fraud checks will have to be completed

There have been widespread reports of 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.

Partner Ben Korklin said: “The microloan scheme is fantastic news for small businesses needing access to funds and crucial peace of mind. Not only are the banks rumoured to be short staffed and wary of lending at this time, but understandably, the banks as big organisations, who need to adhere to legislation and complicated compliance, are not finding it easy to put processes in place to issue the Business Interruption Loans quickly.

With this in mind, hopefully the new loan scheme will be easier for the banks to process more quickly, as the risk will have been removed.”