Today, businesses will be able to apply for loans of up to £50,000 in a scheme backed by the Treasury. The new scheme, dubbed bounce back loans, will offer smaller amounts than the existing Coronavirus Business Interruption Loan Scheme (CBILS). The Treasury says they will be quicker and easier to apply for and will have a 2.5% interest rate. The form will be seven questions long and the loan is 100% guaranteed by the government.
Luke Davis, CEO and Founder of IW Capital, a leading SME investment firm commented on the launch of the new scheme: “This is a hugely positive step in the short-term for small and micro-businesses who are in desperate need of survival capital. For businesses with more than around ten employees, however, this is likely only to cover a month or two of expenditure and with no end in sight for lockdown, much more support will likely be needed. The CBILS has come under massive scrutiny both for who is guaranteeing the cash and the time it takes to process the payments.”
“This addition will undoubtedly save many businesses in dire need of funds, but it will not be a game-changer for most. This is especially true of early-stage loss-making companies or those without the requisite three years trading. This is where private finance is going to be more important than ever. Investors are starting to realise that there are opportunities out there to support great businesses – sometimes at a reduced cost. So, while debt may be more available than ever before, equity finance will remain a key route to saving firms from going under and, crucially, helping some to grow.”