The chancellor has told lenders to offer the government’s Bounce Back Loan scheme at an interest rate of 2.5 per cent in a bid to ensure the loans are affordable and accessible for small businesses.
In a letter to lenders on Friday evening (May 1), Rishi Sunak stated the price of BBLs was “critical to its success”.
He added: “Together, we need to ensure that these loans are affordable and accessible. As such, and incorporating a range of data, I have come to the decision the rate should be set at 2.5 per cent.”
The BBLS is intended to help the smallest of businesses with loans of between £2,000 and £50,000. The government will pay the interest on the loan for the first year and there will be no capital repayments owed for 12 months.
Through the scheme, available from today (May 4), the government will provide lenders with a 100 per cent guarantee for the loan, meaning businesses eligible for the scheme will not have to go through the same credit checks required for the CBILS, which offers an 80 per cent guarantee.
The chancellor’s letter also laid out new boundaries to avoid overlap and ensure a smooth interaction between the BBLS and CBILS.
Mr Sunak will set the minimum loan size under CBILS at £50,001, adding that any customer with a CBILS loan of £50,000 or less would be able to switch that facility to a BBLS loan over the next few months.
He also announced the Treasury had amended the law so that providing regulated small business loans of £25,000 or less would not be considered a regulated activity for the purpose of BBLS.
Mr Sunak said this would enable small businesses to access their loans quickly.
The chancellor announced the introduction of BBLS last week (April 28) to alleviate concerns the smallest businesses in the UK were potentially slipping through the net of the government's economic response to the Covid-19 crisis.
What do you think about the issues raised by this story? Email us on email@example.com to let us know.