Commercial News

Government extends Recovery Loan Scheme by two years

The Government has announced an extension of the Recovery Loan Scheme by a further two years, business minister Kwasi Kwarteng announced today.

Rozi Jones
20th July 2022
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"The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country"

The Recovery Loan Scheme launched in April 2021 and was originally scheduled to run until 31 December 2021. At Autumn Budget 2021, the government extended the scheme by six months to 30 June 2022 and made some adjustments to its terms. The government provided a guarantee of 80% for loans made before 1 January 2022 and 70% for loans after that date. The borrower remains 100% liable for the debt.

Kwarteng said: “The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country, while stimulating local communities, creating jobs and driving economic growth in the UK.”

The new scheme will open for applications in August 2022 and further details will follow when the scheme goes live.

The British Business Bank has also confirmed that, through the initial Recovery Loan Scheme, accredited lenders have offered over £4.5bn to smaller UK businesses.

Of the £4.51bn of total funding offered through 20,643 facilities, £3.83bn has been drawn down through 18,338 facilities.

Catherine Lewis La Torre, CEO of the British Business Bank, said: “The British Business Bank is committed to supporting smaller businesses in accessing the finance they need to grow sustainably. Thousands of businesses in all sectors and from right across the UK have taken out loans under the Recovery Loan Scheme. This will better position them to confront both the challenges and opportunities that are ahead.”

David Fleming, UK head of restructuring at Kroll, commented: “Further support is certainly needed and is a welcome initiative. However, there was a low take up of the previous RLS scheme due to the restrictive terms and the fact that many businesses had already accessed government support by way of the original CBILS and other schemes. Increasing leverage and repayments is a big decision to make for directors that are still struggling now we have returned to a level of normality, and the banks will still need to assess the credit risk despite the government guarantees that have been in place. Given the recent scrutiny over the rollout of the earlier loan schemes, it may be more challenging for the banks to extend further loans where the customers are outside of normal banking terms.

“There are a lot of companies who have taken on a lot of debt in recent years and are yet to return to the same profitability pre-Covid. The increased interest rates and need for personal guarantees may result in a lacklustre take up of the new RLS, but hopefully access to the new scheme will be attractive for businesses and ultimately the devil will be in the detail.”

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