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Coronavirus: State-backed 'bounce back' loans launch to help small firms

Rishi Sunak announced the 'micro loans scheme' last Monday to help small businesses stay afloat during the coronavirus crisis. Credit: 10 Downing Street

Small firms in the UK can now apply for "bounce back" loans worth up to £50,000 - which are backed by the government - after the scheme announced by Rishi Sunak was launched.

Last Monday, the chancellor announced the "micro loans scheme" to help small firms access credit in order to stay afloat during the coronavirus crisis, after previously being denied by banks.

From Monday firms can apply for a loan worth up to a maximum of £50,000, or 25% of turnover, with the government paying the interest for the first 12 months.

The minimum a business can borrow is £2,000.

There's a flat interest rate on the loans of 2.5%, and the loan can be repaid over six years.

The government will provide lenders with a 100% guarantee for the loan and cover the cost of any fees and interest for the borrower for the first 12 months.

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Only firms negatively affected by coronavirus, which were not "undertaking in difficulty" on December 31, 2019, so before the crisis, can apply for the loan.

The government has said thousands of businesses are eligible, including high street staples like hairdressers, coffee shops and florists.

Mr Sunak said there will be “no forward-looking test of business viability, no complex eligibility criteria" for firms when applying for the loan, "just a simple, quick standard form for businesses to fill in”.

Any business which had already applied for loans through other coronavirus support packages can apply to have their loan transferred to this scheme.

The aim of the bounce back loan scheme is to "make sure [small businesses] get the finance they need - helping them bounce back and protect jobs", Mr Sunak said.

Business secretary Alok Sharma added: "This new scheme of 100% government-guaranteed loans gives owners of even the smallest businesses the confidence and flexibility to borrow a sum which works for them.

"This will help ensure they can continue to trade, and be a key part of our efforts to reboot the British economy."

The loan scheme for small businesses is part of a range of measures set out by the chancellor to protect the economy.

The government says £7.5 billion has already been awarded in business grants, while four million jobs have been supported through the job retention scheme.

The loans for small businesses are available through a network of lenders, including the five largest banks, and can be applied for here.

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