The Government has announced a 12-month interest-free  Bounce Back Loans scheme with £50,000 limit and 100% guarantee.

• Businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
• Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form
• Loan terms are up to six years
• All firms trading as of March 1 will be able to get cash
• Banks will no longer require forward financials or business plans
• You can’t apply if you’ve already had a coronavirus business interruption loan but you can port your existing loan of up to £50,000 across

The Bounce Back Loans scheme is capped at 25 per cent of turnover and promises a streamlined application process. The new scheme opens on Monday 4th May, successful applicants will receive the money within 24 hours.

As with the Coronavirus Business Interruption Loan Scheme, the British Business Bank will administer the Bounce Bank Loans, which will be offered by the 50 plus banks currently taking part in CBILS.

It should be noted that, to persuade banks to lend the money, the taxpayer will cover 100 per cent of their losses if a borrower defaults.

The £200,000 limit on turnover ensures that Bounce Back Loans cover most of the UK’s 5.6m micro businesses with up to nine employees, which turned over £900bn in 2019 or an average £160,000 each the Treasury has reported.

But, small businesses can only apply for a Bounce Back Loan if your business was not an “undertaking in difficulty” as of December 31 2019. You are also excluded from applying if you’re already claiming under the CBILS. That said, if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you should contact your lender before 4th November, 2020.

“The big question now is whether the banks can actually make this work and get those loans out of the door in 24 hours. The other question is over whether they will be affordable in the long run.”

Brian Palmer, tax policy expert at the Association of Accounting Technicians, added: “The launch of the Bounce Back Loan, supported by government guarantees, a low rate of interest, no arrangement fees and a 24-hour turnaround is just the sort of thing that small businesses have been crying out for. The loan amounts aren’t huge but are significant enough to be of immediate help. However, there will be some fears that when lockdown is eased, the bounce back may not be robust enough to enable small businesses to meet the repayments.”