The Chancellor’s newest scheme, Bounce Back Loans, indicate a movement to the next phase of the Government’s approach to dealing with the economic impact of COVID-19, but start-up businesses or those engaged in R&D are being forgotten, says Richard Churchill.
This could have been done sooner and the Chancellor is still side-stepping the request for a 100% guarantee on loans up to £250,000 through the Coronavirus Business Interruption Loan Scheme or reducing viability criteria by extending maximum loan terms, measures that other countries have introduced. Extending the Government guarantee from 80% to 100% on loans of up to £250,000 represents the same financial risk to the Government as these new £50,000 Bounce Back Loans.
The Bounce Back Loans are another welcome step by the Government. The fast turnaround will give comfort to those applying and appears to be linked to the exit of lockdown.
The very name itself is aimed at giving business the working capital they will need to reopen once it is safe to do so. The £50,000 loan, which is 100% guaranteed by the Government and on which the Government will pay interest for the first 12 months, is aimed at giving business the ability to buy new stock, pay staff and advertise when they can reopen.
For many small businesses, this lifeline will be needed as they often live ‘hand to mouth.’ The Chancellor has also indicated that the scheme will be easy to apply for, with a simple quick form and no forward-looking tests required. The fact that it is simple, opens on Monday and businesses should have their money in 24 hours, will be a great relief to many cafes and other shops that are starting to reopen – the £50,000 should be in their account by next Tuesday.
However, this is still a loan and, ultimately, will have to be repaid – the terms of this and interest that will be charged are currently unknown. However, if it is all repaid within 12 months then the cost to the business will be zero (as the Government will pay the interest).
If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please speak with your usual Blick Rothenberg contact
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