Chancellor announces “Bounce Back” loan scheme

The Government has announced a new loan funding scheme for businesses adversely affected by the Coronavirus outbreak. 
The scheme aims to provide loans of between £2,000 and £50,000 which will be 100% guaranteed by the government and will be 100% interest and fee-free for the first 12 months.  Loans will be repayable over a maximum of six years with no repayments in the first 12 months, and the Government says it is working with lenders to agree on a low rate of interest on the loans.
The scheme is to be available to small and medium-sized businesses - in order to be eligible businesses will need to meet the following requirements:
• Based in the UK
• Negatively affected by coronavirus
• Not an ‘undertaking in difficulty’ on 31 December 2019
Businesses which have already received loans under the Coronavirus Business Interruption Loan Scheme (CBILS) will not qualify for funding under this scheme, although businesses which have received loans of up to £50,000 under the CBILS scheme will be able to arrange with their lender for the loan to be converted to a Bounce Back loan.
Further details of the scheme are to follow and the scheme will become available from 4 May.
WR comment – the scheme is clearly designed to be quicker and easier to access than CBILS where finance providers have been struggling to meet demand.  The decision by the government to provide a 100% guarantee takes away concerns small businesses have had about providing personal guarantees and should also keep the borrowing costs on a 100% guarantee backed loan relatively low.  We assume that the definition of small and medium-sized entity here will be the same as for CBILS – those with turnover up to £45 million.  
It will, however, be interesting to see how an “undertaking in difficulty” will be defined – clearly, the Government does not want to provide support to businesses which were already failing before the current Coronavirus outbreak, but how such criteria can be set to allow an objective decision to be made on any given business may prove to be a real challenge.

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