The UK Government has long offered some element of guaranteed loans for SMEs. These have recently gained much increased prominence as part of the Covid-19 crisis.
The three current schemes that are available for SMEs are:
- Start Up Loans;
- Bounce Back Loans; and
- Corona Business Interruption Loan Scheme ("CBILS").
The longstanding Enterprise Finance Guarantee Scheme ("EFG") has been suspended while CBILS is open (wit which it shares many characteristics.
Start Up Loans supports startups with finance and mentoring. Through the Start Up Loans scheme, businesses can get loans up to £25,000 to launch new businesses or invest in growing existing businesses that have been trading for less than 24 months. The loan is in the name of the founder, so is a personal liability, but no security is taken and the terms are generally lower than would be paid on normal commercial loans, with interest charged at 6% and repayments periods of up to 5 years.
Bounce Back Loans are currently available as part of the Government's Covid-19 support options. Amounts up to £50,000 can be borrowed. The terms are generous,, with interest rates at 2.5%, no interest in the first year and repayment periods of up to 6 years.
CBILS are for amounts up to £5m, with no payments in the first year, Other terms will vary with the lender.