Chancellor announces “Bounce Back Loans” for micro businesses – with 100% guarantee

Along with the Treasury amending the existing business interruption loan scheme this afternoon, Rishi Sunak announced a new specific initiative for smaller businesses, saying he had been in close talks with the banks in recent days about the loans. The loans for smaller and micro businesses will be available from 9am next Monday.

He stated: “There will be no forward-looking tests of business viability; no complex eligibility criteria; just a simple, quick, standard form for businesses to fill in.”

Sunak pledged that for most firms, loans should arrive within 24 hours of approval, and that the government will support lending by guaranteeing 100 percent of the loan.

But addressing calls to raise the guarantees on the existing Coronavirus Business Interruption Loan Scheme (CBILS), from 80 to 100 percent, he said: “We shouldn’t ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus. So I don’t think it’s right to provide 100 percent guarantees on all our schemes.”

Instead, he added, the new Bounce Back Loans “carefully target that extraordinary level of state support at those who need it most."

The most recent figures for the current business interruption loan scheme show lenders have provided more than £2.8bn in emergency loans to SMEs, after approvals increased 120 percent in a week.

The Treasury also today provided a round-up of progress on the following support measures:

• On the job retention scheme - more than 500,000 claims have been made to the value of £4.5bn;
• On business grants - half a million business properties have benefitted from £6bn of business grants;
• The CBILS has now seen more than 20,000 loans approved;
• The Covid Corporate Financing Facility has provided over £14bn for larger firms.

The FCA also made an announcement today on the Treasury’s amendments to the CBILS, and what that means for how firms need to comply with its rules, when processing CBILS applications.

It stated: "We have been working closely with the government and the British Business Bank on the changes to CBILS and the launch of the Bounce Back Loan scheme (BBL).

"We recognise the need to make the changes to the CBILS scheme immediately. As an interim measure, pending the roll-out of the BBL scheme, if firms comply with the relevant requirements of CBILS as announced today, we do not expect them to comply with CONC 5.2A.4-34 where the lending is regulated.

"CONC 5.2A contains rules and guidance on carrying out a reasonable assessment of a customer’s creditworthiness before taking the process forward. But firms must continue to carry out creditworthiness assessments in line with the whole of CONC 5.2A on all other regulated lending."