Responding to the announcement that the Government is establishing a new micro loan scheme for small businesses, encompassing a 100% government guarantee on facilities worth up to £50,000 (capped at 25% of turnover) and a streamlined application process, Federation of Small Businesses (FSB) National Chairman Mike Cherry said:
"To date, the existing interruption loan scheme has not been working for the small firms that make-up 99% of our business community.
“The decision by the Chancellor to listen to our recommendation for a 100% guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands.
“The headline terms will be hugely welcomed by the sole traders and micro businesses that make-up 95% of the small businesses community. Removing the need to provide forecasts marks an important step forward – small firms cannot be expected to predict the future in this climate.
“From here, we need the right delivery. The new fast-track system must be established by next Monday with money delivered 24 hours after a successful application as promised. All those who have been declined a small coronavirus business interruption loan scheme (CBILS) facility should now be written to with the offer to re-apply via this new system. Those mid-way through a standard CBILS application should also be given the option to change tack.
“Many small businesses have had to pay March and April’s payroll, on top of other overheads, with no revenue coming in at all. The CBILS initiative was their only lifeline until job retention scheme payments kicked in. It has so far proved to be extremely difficult to access for the vast majority. Today’s announcement promises to change that fundamental lack of access to working capital.
“In the long-term, we need to protect the competition achieved in the small business lending market that so many have fought so hard to secure. At the end of this crisis, non-bank lenders are going to be key to economic recovery as part of a thriving small business finance market that does not just rely on the big five banks. We look forward to working with the Government to ensure alternative lenders can play that vital role.
“Equally, the big banks must ensure they’re in a position to facilitate a large a number of small business loans. Some of their systems are already creaking under the strain, before this new system is brought in on top. Some lenders have been unable to facilitate such lending because they have not got their backroom operations in order. This issue requires urgent attention.”