The Chancellor’s newest scheme, bounce back loans, indicate a movement to the next phase of the government’s approach to dealing with the economic impact of COVID-19, but start-up businesses or those engaged in R&D still forgotten, said leading tax and advisory firm Blick Rothenberg.
Richard Churchill, a business advisory partner of the firm said: ‘This could have been done sooner and the Chancellor is still side stepping the request for 100% guarantee on loans up to £250,000 through CBILS or reducing viability criteria by extending maximum loan term.
‘Measures that other countries have introduced. Extending the government guarantee from 80% to 100% on loans of up to £250,000 represents the same financial risk to the government as these new £50,000 bounce back loans.
Richard noted that: ‘Another welcomed step by government. The fast turnaround will give comfort to those applying and appears linked to the exit of lock down hence the name bounce back.
‘The very name itself is aimed at giving business the working capital they will need to reopen once it is safe to do so. The £50,000 loan, which is 100% guaranteed by the government and on which the government will pay interest for the first 12 months, is aimed at giving business the ability to buy new stock, pay staff and advertise when they can reopen.
He added: ‘For many small businesses, this lifeline will be needed as they often live hand to mouth. The Chancellor has also indicated that the scheme will be easy to apply for, with a simple quick form and no forward-looking tests required.
‘The fact that it is simple, opens on Monday and businesses should have their money in 24 hours will be a great relief to many cafes and other shops which are starting to reopen, the £50,000 should be in their account by next Tuesday.
Richard concluded that: ‘This is still a loan and, ultimately, will have to be repaid the terms of this and interest which will be charged are currently unknown, however, if it is all repaid within 12 months then the cost to the business will be zero (as the government will pay the interest).’
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