Register for our special COVID-19 Newswires
Trade body UK Finance has warned small businesses to consider their ability to repay a Bounce Back loan before taking one out.
The warning followed the publication of Treasury figures which highlighted the popularity of the Bounce Back Loan Scheme. The scheme allows small businesses, hit by the impact of the coronavirus (COVID-19) pandemic, to apply for up to £50,000, with the government guaranteeing 100% of the advance.
Businesses can apply for a minimum of £2,000, up to a maximum of £50,000, or 25% of business turnover, with the government paying the interest for the first 12 months.
According to the Treasury, 69,000 Bounce Back loans worth over £2 billion were approved within 24 hours of the scheme launching on 4 May.
Commenting on the figures, Stephen Jones, Chief Executive of UK Finance, said: 'While businesses only need to fill in a simple form online to apply, it's important to remember that this type of finance is debt, not a government or bank grant, and will need to be repaid by the borrower over the six-year term of the loan.
'All businesses should consider carefully their repayment obligations before completing a Bounce Back loan application. Under the terms of the scheme, lenders are required to seek to recover any unpaid interest and principal on Bounce Back loans from borrowers.'