UK government introduces new SME loan scheme

The UK government will provide further help for small businesses hit by the economic effects of the coronavirus with the introduction of 100% government-backed Bounce Back Loans of up to £50,000, it announced Monday.

In tweets, the UK’s Chancellor of the Exchequer Rishi Sunak said: “We’ve been in close talks with the banks in recent days and these loans will be available from … next Monday [4 May].”

He said there would be “no forward-looking tests of business viability; no complex eligibility criteria” and that most firms should see their loans arrive within 24 hours of approval.

The main elements of what Sunak described as a “micro loan scheme” are:

• Businesses will be able to borrow between £2,000 and £50,000.
• Loans will be interest-free for the first 12 months, and businesses can apply online through a short and simple form.

In his statement to MPs in the UK Parliament’s House of Commons, Sunak said that 4 million jobs had been furloughed and surveys indicated that a quarter of UK businesses had paused trading.

Organisations, including the Association of International Certified Professional Accountants, had urged Sunak to have the government guarantee 100% of loans under £250,000.

Andrew Harding, FCMA, CGMA, the chief executive–Management Accounting at the Association, said that to provide quicker access to working capital and help with immediate, critical cash flow issues, “we still believe the government should extend its 100% loan guarantee for all loans under £250,000, subject to still performing their essential fraud and economic crime checks”.

However, Harding said that the announced 100% small business loan guarantee up to £50,000 would provide “some much-needed financial relief to many good businesses”.

Earlier on Monday, Harding and the UK leaders of 15 member organisations representing a total of around 300,000 members wrote to the chancellor.

The open letter welcomed the measures already announced by the UK government to support small and medium-size businesses (SMEs) and the self-employed, but it said, “Our members are all raising serious concerns about access to the existing support schemes the government [has] announced.”

In the letter, the leaders set out three recommendations:

Change access to the Coronavirus Job Retention and Coronavirus Self-Employed Income Support Schemes. Currently, applications to the Coronavirus Job Retention Scheme and the Coronavirus Self Employed Income Support Scheme are based on either an average of the last three years’ self-assessment forms or a PAYE payroll scheme on or before 19 March 2020.

The leaders urged the chancellor to allow directors and owners of “close companies” — those with up to five participants as defined by the Corporation Tax Act 2010 — to have their business dividend payments taken into account alongside their PAYE earnings. 

Expediate Coronavirus Self-Employed Income Support Scheme funds. The Self-Employed Income Support Scheme won’t come into operation until June, and many members require immediate cash injections to avoid the prospect of their businesses’ collapsing, the leaders said in calling for the scheme to be speeded up or money given to the self-employed by way of a cash grant.

Ensure more SMEs are benefiting from Coronavirus Business Interruption Loans. The leaders urged the government to increase its guarantee to 100% for loans worth less than £250,000 for SMEs and for banks to speed up their approval processes.

For more news and reporting on the coronavirus and how management accountants can handle challenges related to the pandemic, visit FM’s coronavirus resources page.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.