UK to implement state-backed loans for small businesses

The UK government will be implementing a new loan scheme starting on Monday. The loans will allow small businesses such as salons, cafes, and florists to receive emergency funds in a bid to keep them afloat during the COVID-19 lockdown.

Finance minister Rishi Sunak had announced about the loans on April 27 despite his stand against commercial state-backed loans. However, he would later give in to the pressure for smaller businesses after a previous scheme took off to a slow start.    

The announced “Bounce Back Loans” will allow companies including sole traders to be eligible for a loan between £ 2,000 ($2,500) and £50,000 ($62,500) with a flat interest rate of 2.5%.

Banks issuing the loans are not required to run credit checks or long-term viability of applicants.

The UK on April had previously rolled out an emergency £330 billion credit scheme, allowing small and medium-sized companies to borrow up to £5 million with 80% in state guarantees.

Any company that had borrowed £50,000 or less before Monday under April’s loan scheme can change it to the “Bounce Back Scheme”.