Small businesses now eligible for new state-guaranteed loans worth up to £50,000

Small businesses will now be able to secure new loans worth up to £50,000 - to help with the impacts of coronavirus - with the government guaranteeing 100% of the risk.

Mr Sunak said he was announcing the new "micro loans scheme" to ensure small firms could access credit they had been previously denied.

He acknowledged that some small firms were struggling to access credit under the Coronavirus Business Interruption Loan Scheme announced earlier in the outbreak.

Mr Sunak said by guaranteeing the full value of the loan, he hopes that lenders will allow companies to borrow the funds they need.

Chancellor Sunak said the “bounce back loans” would have the interest paid by the government for the first 12 months.

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But he rejected calls for the government to underwrite other coronavirus loan schemes with a 100% guarantee, insisting his new plan would “carefully target” the level of state support at those who need it most.

He told MPs: “I know that some small businesses are still struggling to access credit.

“They are in many ways the most exposed businesses to the impact of the coronavirus and often find it harder to access credit in the first place.

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“If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through this crisis.”

The new “microloan scheme” would provide a “simple, quick, easy” solution, he said.

Mr Sunak added: “Businesses will be able to apply for these new bounce back loans for 25% of their turnover up to a maximum of £50,000 with the Government paying the interest for the first 12 months.”

The loans will be available from 9am next Monday, with “no forward-looking test of business viability, no complex eligibility criteria, just a simple, quick standard form for businesses to fill in”.

Labour shadow chancellor Anneliese Dodds asked the chancellor to "ensure" bounce back loans get to those businesses that need it.

And she called on him to announce further schemes to help the UK economy improve more quickly after the crisis.

“The recovery from this crisis must be faster and wider. To ensure as many people as possible have a job to come back to, we need a flexible furlough scheme," she said.

She called for the chancellor to amend the furlough scheme to allow workers to come back on a part-time basis and talked about how those hit hard could be supported with “employment-boosting, redeploying, retaining schemes”.

CBI director-general Dame Carolyn Fairbairn said the scheme could be “transformational”, adding: “Banks now need to continue their work in overdrive to get the loans flowing faster.”

Federation of Small Businesses national chairman Mike Cherry said: “This crucial new initiative should enable thousands of small businesses to access the working capital they need quickly, helping to protect the millions of jobs they provide in every part of the UK.”