Rishi Sunak steps back and offers small businesses 100% loan guarantees | Politics

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Britain’s smallest businesses will be offered fully government-backed rescue loans after much criticism for slow use of emergency bank loans during the coronavirus crisis.

In a descent following mounting pressure on the government to revise its emergency loan program after thousands of private liquidity companies were denied support, Chancellor Rishi Sunak said that small businesses would be offered new “bounce loans” starting next week with full government support.

Sunak said last week that he was “not persuaded” by calls to provide a 100% state guarantee, despite less than half of all applicants for help getting a loan. emergency.

Designed to provide smoother access to liquidity for small businesses struggling to access government-supported loans, Sunak said businesses would be able to request “micro-loans” of up to 25% of their turnover up to £ 50,000.

The Chancellor has faced increasing pressure from business groups and the Labor Party to increase the generosity of the government guarantee on her emergency loan program during the pandemic. However, Sunak did not provide 100% guarantees to large companies, saying that taxpayers should not be exposed to the risks of default by large companies.


Rishi Sunak announces micro-loan program for businesses with £ 50,000 limit – video

Announcing the program in Parliament, Sunak said small businesses could apply for the new loans from street banks as early as Monday.

“I know that some small businesses are still struggling to access credit. They are in many ways the companies most exposed to the impact of the coronavirus and have trouble accessing credit in the first place. They will need additional support to overcome this crisis, “he said.

The new loans offer street banks a guarantee that the state will repay the bank for the full value of the loan if a borrower is unable to repay, compared to 80% on the government loan for interruption of coronavirus ( CBIL) of the government.

Although businesses do not get money from the government if they cannot repay a loan, the program is designed to encourage banks to lend to businesses when they could normally refuse a loan request because the government assumes all the risks.

The Treasury had previously resisted calls to offer 100% guarantees, saying the banks should share the risk with taxpayers. Speaking at the Downing Street daily press conference last week, the Chancellor said: “I am not convinced that adopting a 100% guarantee is the right thing to do. “

Although other countries, including Switzerland, have offered 100% guarantees on emergency loans, Sunak said Britain has offered businesses much more assistance in other ways, including tax cuts and wage subsidies, which meant that such measures were unnecessary.

However, thousands of companies across the country continued to complain that the CBIL regime was cumbersome and had too many financial hurdles that many companies could not overcome.

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Business lobby group CBI and Bank of England Governor Andrew Bailey have stepped in for the past few weeks, suggesting that a 100% increase in state-sponsored guarantee would help eliminate bottlenecks to throttle and speed up the loan process.

Despite striving to push for full support for small businesses, Sunak has rejected calls to extend the emergency loan scheme to all businesses, telling Parliament: “We should not ask taxpayers ordinary today and tomorrow bear the entire risk of lending almost unlimited sums to companies which, in some cases, have very little chance of repaying these loans and not necessarily because of the impact of the coronavirus. “

Former Chancellors George Osborne, Norman Lamont and Sajid Javid, and Shadow Secretary for Business Ed Miliband had all called on Sunak to switch to fully guaranteed government commercial loans.

Miliband said it was welcome that Sunak had changed his mind, but added: “There are still very serious problems with the operation of CBILs for small and medium-sized businesses seeking more than £ 50,000 in support. They will ask why they cannot get quick loans to get them out of the crisis and if the CBILs will remain as slow and cumbersome as they have been so far. “

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