BRITAIN’S small businesses will be able to secure a loan worth up to £50,000 with the Government guaranteeing 100% of the risk in the latest emergency scheme aimed at helping firms survive the coronavirus crisis.

In a Commons statement, Rishi Sunak said the "bounce-back loans" would have the interest paid by the Government for the first 12 months.

He acknowledged some small firms were struggling to access credit and by guaranteeing the full value of the loan he hoped lenders would allow companies to borrow the funds they needed to survive.

However, the Chancellor 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 said: "We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus.

"So, I do not think it is appropriate to provide 100% guarantees on all of our schemes.

"Instead, these new bounce-back loans carefully target that extraordinary level of state support at those who need it most. The £50,000 cap balances the risk to the taxpayer with the need to support our smallest businesses."

Unlike the existing loan scheme, banks will not face any of the risk for the new ones, which could stretch into many billions of pounds depending on how long the coronavirus crisis lasts.

Mr Sunak explained how some small businesses were 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.

"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," declared Mr Sunak.

The new "microloan scheme" would provide a "simple, quick, easy" solution, he insisted.

"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," explained the Chancellor.

He told MPs the loans would 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".

Business groups welcomed the move.

Mike Cherry of the Federation of Small Businesses said: "To date, the existing interruption loan scheme has not been working for the small firms that make-up 99% of our business community.

“The decision by the Chancellor to listen to our recommendation for a 100% guarantee on smaller loans, alongside the creation of a new fast-track system for those applying for them, will give hope to thousands.”

Andrew McRae, the organisation’s Scottish Policy Chairman, also gave a cautious welcome to the new scheme, saying it “could finally get the money moving into small businesses and help them bridge the finance gap. If it does, it will prove to be a lifeline for those businesses and the jobs they sustain”.

Responding to Mr Sunak in the chamber, Anneliese Dodds for Labour said it was a “relief” to hear the Chancellor say that there would now be a full guarantee for loans of up to £25,000 but she stressed people needed to know that normal commercial loan requirements would not continue to “clog up the system”.

The Shadow Chancellor said the Opposition had highlighted many of the gaps within existing schemes to protect incomes and would continue to push for them to be filled.

“However, we must be clear,” she insisted. “The reason why those gaps are such an income-crushing, insecurity-producing crisis for so many, is because the only alternative to coverage by the schemes is in most cases Universal Credit. Universal Credit, which pushes people right down to an average of ten percent of the income of the rest of society.

Alison Thewliss for the SNP said the bounce-back scheme was a good move and deferring could be useful but she pointed out many small businesses felt that this just stored up debt for the future.

"It is understandable that they may not want to take on more debt, so I ask him will he look at more grants, CBILS overdrafts and revolving credit to help businesses through the current difficulties?"

Mr Sunak pointed out the new loan scheme would not ask for any forward-looking information from companies and would be a very simple form for companies to fill in.

"It will be self-certification and the banks will be doing customary fraud and money laundering and identity checks rather than any credit checks given our 100% guarantee, so that problem should be solved."

He added: "She is right to point out that some businesses would prefer to have things like overdrafts and in that vein I'm pleased to tell her that the last numbers I had were that about 20,000 new overdrafts have been extended together with about 60,000 capital repayment holidays."

Meanwhile, Alister Jack, the Scottish Secretary, commented: “It is great news that the Chancellor is to provide new UK Government-backed loans to businesses across the UK, with the UK Government guaranteeing 100% of the loans.

“This new scheme comes on top of the unprecedented levels of support we have put in place to make sure that our economy can recover once we get through the coronavirus crisis.”

Also in the Commons chamber, Mr Sunak highlighted how the Government's furlough scheme had been at the centre of efforts to ensure that the UK could bounce back "as quickly as possible".

He said: "I wholeheartedly believe that the best way out of this is to ensure that as many people as possible can return to the job that they had. That is the best way to protect people, to protect their livelihoods, their families, their household incomes.

"Which is why all of our support has been conducted with that aim in mind - how can we help support businesses, how can we help them to keep their employees attached to that business?

"I believe that our furlough scheme stands at the centre of that, all the other interventions will help support that aim so that as we emerge from this crisis, we can bounce back as quickly as possible to the life that we once knew."

The Chancellor added: "The goal of our economic strategy is to provide a bridge over what will be a sharp and significant crisis.

"By keeping as many people as possible in their existing jobs, supporting viable businesses to stay afloat and protecting the incomes of the most vulnerable.

"In other words, to maintain the productive capacity of the British economy."