Chancellor Rishi Sunak is launching a new 100% government backed loan for small businesses in a bid to unblock a backlog of applications with the banks.
He sees mainstream banks as the weak link in his multi-billion-pound rescue plans for the economy because they are taking so long to sort out requests from businesses desperate for cash.
Instead of providing accounts, business plans and going through credit checks, the government is offering loans of up to £50,000 with no capital or interest payments in the first 12 months – with the taxpayer picking up the tab if any borrowers default.
To access the money, bosses and entrepreneurs merely have to complete a two-page self-certification form online.
100% government guarantee
“I’ve heard some calls for the government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case for doing that universally,” said the Chancellor.
“We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus.”
Business leaders welcomed the measure, with Dame Carolyn Fairbairn, CBI director-general hailing it as ‘transformational’ for small firms.
“Sole traders, micro-firms and entrepreneurs will now have a simple route to fast finance to stay afloat, without red tape or time-consuming checks,” she said.
Lifeline for small businesses
“Thousands of businesses could be saved by this lifeline. Banks now need to continue their work in overdrive to get the loans flowing faster.”
Meanwhile, earlier in the day, Prime Minister Boris Johnson returned to take the helm at 10 Downing Street after recovering from his bout of coronavirus.
Looking fit and robust, he warned Britain must continue in lockdown for some weeks more in case another surge of deaths was triggered by a lack of social distancing.
“So, it follows that this is the moment of opportunity, this is the moment when we can press home our advantage, it is also the moment of maximum risk,” he said.