Recovery Loan Scheme extended for the second time
The Recovery Loan scheme (RLS), providing government-backed loans to small businesses has been extended for a further two years.
The extension was confirmed today, by Business Secretary Kwasi Kwarteng. Launched in April 2021, the scheme is reported to have already supported over 18,000 businesses recovering from the Covid-19 pandemic, with an average of £202,000 provided to each of these businesses in support.
Who is eligible for the Recovery Loan Scheme?
The scheme is aimed at supporting access to finance for UK businesses. It provides lenders with a government-backed guarantee against the outstanding balance of the loan.
The Business Secretary, Kwasi Kwarteng believes the extension of the Scheme will help ensure the government continues to provide finance to thousands of small businesses countrywide, at the same time creating jobs, stimulating local communities, and driving economic growth in the UK.
Chancellor of the Exchequer, Nadhim Zahawi has confirmed that the principle if the extended Recovery Loan Scheme remains the same, and the government will underwrite 70% of lender liabilities, at the individual borrower level, for a lender fee in return. Lenders are required to ensure that the benefits of this guarantee are passed through to businesses. (Note that borrowers are always liable for the debt)
Whilst the maximum loan size is to remain at up to £2 m, it is important to note that lenders may now require a personal guarantee from borrowers, The chancellor stated that this is in recognition that businesses are in a better position now than during the pandemic.
Changes from the original Recovery Loan Scheme
The Original RLS provided up to £10 m per business and guaranteed 80% of the finance to the lender.
At the 2021 Autumn Budget, the Chancellor announced that the Scheme would be extended until 30.06.2022.
Changes from January 2022 limited the scheme to small and medium sized enterprises, restricted the maximum finance available to £2 million per business and reduced the guarantee which the government provides to lenders to 70%
Further information
Further information on the Recovery Loan Scheme can be found Gov.uk here. The British Business Banks’s website, once updated here.
Whilst the maximum loan size is to remain at up to £2 m, it is important to note that lenders may now require a personal guarantee from borrowers, The chancellor stated that this is in recognition that businesses are in a better position now than during the pandemic.
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