Banks are inundated with requests for 'bounce back' loans as scheme offering up to £50K in quick credit launches
- Firms can apply for loans between £2,000 and £50,000 under the scheme
- It aims to get cash quickly to firms struggling due to coronavirus
- The bounce back loans are 100% backed by the Government
- Barclays received 200 applications in the first minute since launch this morning
Banks are being flooded with requests for so-called 'bounce back' loans from businesses and sole traders struggling due to the coronavirus outbreak as the scheme launched today.
Designed to get cash quicker to UK businesses with loans between £2,000 and £50,000, the initiative requires firms to fill in a 'standardised' online form.
Barclays said it received around 200 applications in the first minute since its launch this morning, while Lloyds revealed it had been sent 2,000 applications in the first two hours.
Coronavirus crisis: Small firms can apply for bounce back loans of up to £50k from today
The 'bounce back loans', which are 100 per cent backed by the Government, are being launched after many businesses criticised the Government's coronavirus business interruption loan scheme for its strict eligibility criteria or money just not coming in quickly enough.
To qualify, businesses must have been trading on 1 March this year and not have been in financial difficulty as of last year.
Firms which have applied for the business interruption loan scheme but have not yet received the money, can switch to the bounce back scheme.
Mike Cherry, the chairman of the Federation of Small Businesses, said the interruption loan scheme has not worked for small firms as the 'customer service has been poor, the application process has been arduous, and the wait times for decisions have been lengthy'.
'The new bounce back scheme offers real hope in this space,' he added.
'We're several weeks into the lockdown – with many business owners having to pay wages, utility bills and rent with no revenue coming in – so its launch can't come soon enough.'
Firms won't have to pay back these loans during the first year, when the Government will cover interest payments. Businesses will start repaying the loans after the first year and will be charged 2.5 per cent interest.
Barclays received around 200 applications in the first minute since the scheme's launch
They also won't have to put their homes or other personal assets as guarantees for banks to issue the loans. But if they can't repay them back, they will be chased by banks, which will seek to grab properties or other assets. If banks cannot recover the money, the Government guarantee will be activated.
The length of the loan is six years, but businesses can repay them back earlier without incurring additional fees.
The 'standardized' online form that businesses need to fill in to apply for the loans includes questions about the company's turnover, whether they have been badly affected by the coronavirus pandemic and how much money they need.
Jonathan Ratcliffe from commercial office agency Offices.co.uk said they applied for the bounce back loans and the process was at first a bit confusing but then 'extremely easy'.
'Once we started the process with Santander (our bank) things were very simple – the only research I needed to do was work out our turnover in the last financial year – and input around five pieces of information such as company number, address, turnover, bank sort/account details and of course how much we needed to borrow – honestly is was very easy indeed', Ratcliffe said.
Businesses can stick with their existing lender or change bank – in the latter case loans may take a bit longer to process.
Matt Hammerstein, the chief executive of Barclays UK, said that the bank had approved all 200 requests within minutes of receiving them, and hopes that most of the loans will be paid out within 24 hours.
The bank had fielded around 35 applications per minute in the following hours, he added.
Meanwhile Lloyds said the average loan size requested so far this morning was around £35,000.
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