Government preparing for surge in "bounce back" loan applications

The Government said it was expecting a surge in applications for the new business loan scheme for the smallest companies when it opens on Monday.

Stephen Barclay, Chief Secretary to the Treasury, told MPs he also expects to see some companies approved for loans under the Coronavirus Business Interruption Loan Scheme (Cbils) switch to the “bounce back” scheme.

He was answering questions from the Treasury Select Committee virtually on the economic impact from the coronavirus crisis, where he suggested more funding schemes could be rolled out.

On the new loan scheme, he said: “Based on the Cbils applications … demand will be high, not least because the majority of Cbils applications were for sums below the £50,000 (threshold) that the Cbils will cover.”

Chancellor Rishi Sunak announced the bounce back scheme, offering loans of up to £50,000 to small businesses, 100% backed by the Government, interest and payment free for the first year.

The scheme launches at 9am on Monday with a standardised form to speed up payments, although concerns over fraud have been raised due to the minimal checks.

Barclay would not say what the interest rates on the bounce back loans would be after the first year and how much money the Government expected to pay on defaulted loans it covered.

Some have suggested a law change may be required, due to rules on banks to ensure they check customers have a plan for repaying the loan.

Barclay said: “If there are any tweaks to the consumer credit (rules) that’s required for the bounce back loan, then obviously we’d bring that to the House.

“But in terms of guidance, the regulators have been clear with lenders and addressing the concerns that were had before.”

The committee was also keen to get more data on loans and questions were raised about what economic modelling had been made to ensure a smooth recovery.

Concerns around freelance workers continue, with MPs questioning Barclay’s claim that 95% of the self-employed staff are set to benefit from the Government’s plans.