By Stephen Dinsmore, Corporate Finance Specialist, Armstrong Watson

LAST week the Chancellor announced that from Monday 4th May, small and medium sized businesses will benefit from a fast-track finance scheme, providing loans of £2,000 up to 25% of a business’s turnover up to a maximum of £50,000.

It is designed to quickly help small and medium sized business access much needed working capital.

The Bounce Back Loan scheme sees the government providing a 100% guarantee to lenders offering the loans and goes over and above the existing Coronavirus Business Interruption Loan Scheme (CBILS) which has guarantees limited at 80% to the lender.

The loans will be distributed through a network of accredited lenders, similar to the CBILS programme with a full list available on the British Business Bank’s website.

Under the new loans, there will be no interest or repayments to make for the first 12 months and terms can be up to 6 years, at an interest rate of 2.5%. As with CBILS there are no personal guarantees required.

The interest and repayment holiday at the start of the loans should provide businesses with well appreciated breathing space for the duration of the lockdown period, as well as easing pressure on cash flow for businesses as they start to re-open and work towards business as usual.

The application process is completed via online banking and involves a self-declaration of eligibility by the business, rather than a traditional affordability assessment by the lender. In the first instance, businesses are advised to contact their own provider but can also approach other lenders if unsuccessful.

The eligibility criteria includes businesses are to be UK based, have been negatively affected by the Coronavirus and not be “in difficultly” as of the 31st December 2019.

Overall I think this is a positive scheme to assist small businesses, however, business owners do need to be aware that, along with other government schemes and measures taken, any loan will have to start to be repaid in 12 months’ time. I would recommend that any business applying for lending consider the future repayment obligations that they will be putting on the business and have a discussion with their professional advisers to seek best advice.

For further information on business lending, please call Steve Dinsmore, Corporate Finance Manager, on 0778 8712 078 or email