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Small firms are to get access to 100% taxpayer-backed loans after they raised concerns about slow access to existing coronavirus rescue schemes.
Chancellor Rishi Sunak told the House of Commons the scheme would start next week, offering firms loans up to £50,000 within days of applying.
It aims to unlock a backlog of credit checks by banks amid fears many small firms could fold before getting loans. The scheme requires filling in a two-page self-certification form online.
The loan terms mean that no capital or interest repayments will be due for one year. Instead, the government will pay the interest for the first 12 months.
Banks have come under fire for delays in handing out loans, but have blamed the heavy workload, need to complete the necessary credit checks, and a shortage of staff.
Mr Sunak told the Commons that the government was not prepared to underwrite 100% of loans as it needed to balance the risk to the taxpayer with the needs of small businesses.
Earlier this month the Governor of the Bank of England, Andrew Bailey, said that slow bank emergency lending “had to be sorted out” and that taking on all the risk from banks could “unblock” the schemes for small business especially.
Unlike the existing loan scheme, banks will not retain any of the risk for these loans, which could stretch into the billions or tens of billions depending on how long the crisis lasts.
To read the Chancellor’s full statement to Parliament, Click Here.