Chancellor Rishi Sunak has announced “micro loans” for businesses, after recognising that some companies were struggling to get the support they needed.
The taxpayer-funded “bounceback” loans will be available up to £50,000 and become available from next week.
Mr Sunak’s Commons announcement folowed criticism that the government’s existing loan scheme has failed to help enough businesses, and amid pressure for the state to guarantee 100 per cent of the loans.
we need to know that normal commercial loan requirements will not continue to clog up the system
Companies will be able to apply for a loan worth up to 25 per cent of their annual turnover, with the government paying the interest for the first 12 months.
He said that the loans would be accessible via a “simple, quick standard form” and that banks would perform only “customary” checks on applicants, assuring MPs: “For most firms loans will arrive within 24 hours of approval.”
Salman Haqqi, personal finance expert at money.co.uk said the loans “may be too little too late” adding: “The delay in accessing government-backed funding means that many small businesses which rely on immediate cash flow, have struggled to stay afloat.
“Small businesses, retailers and sole traders need access to funds, and fast. The new loan system, which will be 100 per cent guaranteed by the Treasury should help. Those eligible should receive the funds within 24 hours of applying, eliminating one of the major barriers.
“But despite the additional funding, confusion remains around which businesses are eligible for which types of loans, and how much money they will ultimately receive. Plus, there are lots of businesses who are still falling between the cracks, directors of limited companies, or people who have been self-employed for less than a year who could be forced into high interest loans offered by some banks.
“Business owners must look at what support they can expect to receive through the government funding, but also check what their bank is doing to support small business.”
Anneliese Dodds, the shadow chancellor, welcomed the announcement but said that parts of the government’s economic package were failing.
“Switzerland has a population of under nine million, yet it approved four times as many loans within its first week than the UK has done in a month,” she said.
“While it’s a relief to hear from the chancellor that there will now be a full guarantee for loans of up to £50,000, we need to know that normal commercial loan requirements will not continue to clog up the system.”
The latest figures stated that 16,600 loans to businesses had been approved through that scheme, an acceptance rate of 46 per cent. Of these, 9,000 loans had been paid out.