Further support for small businesses feeling the squeeze as £4.5 billion Recovery Loan Scheme extended
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Business Secretary Kwasi Kwarteng announced earlier this week that the vital support scheme that offers government-backed loans to small UK businesses will be extended for a further two years. Originally launched in April 2021 the Recovery Loan Scheme (RLS) was aimed at supporting access to finance for UK businesses recovering from the Covid-19 pandemic. It has supported almost 19,000 businesses with an average of £202,000 in support. The scheme gives lenders a government-backed guarantee against the outstanding balance of the loan.
The chancellor has already announced business support measures through increasing the Employment Allowance, introducing a 50% business rates relief for eligible high street businesses, and slashing fuel duty. The RLS extension provides further support for businesses struggling with financial pressures amidst the cost of living crisis.
Business Secretary Kwasi Kwarteng said:
“Small businesses are the lifeblood of the British economy, which is why we are determined to support our traders and entrepreneurs in dealing with worldwide inflationary pressures.
“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.”
Chancellor of the Exchequer, Nadhim Zahawi, said:
“Small businesses are the engines of economic growth, supporting jobs and livelihoods in communities right across the UK.
The Recovery Loan Scheme has supported thousands of businesses over the past year and this extension will ensure they continue to access the finance they need to navigate the months ahead.”
The scheme has supported over 16,000 English businesses, as well as 1,000 businesses in Scotland, 600 Welsh businesses and 300 in Northern Ireland.
Examples of businesses which have benefited from the scheme include Leeds-based firm Wildfire Marketing, which used the loan to take on new employees to help the business grow, and White Light Ltd, a lighting firm which required finance to purchase new equipment for the latest West-End shows.
The principle behind the extended Recovery Loan Scheme remains unchanged: government will underwrite 70% of lender liabilities, at the individual borrower level, in return for a lender fee. Lenders must ensure that the benefits of the government guarantee are passed through to businesses.
The maximum loan size remains at up to £2m. However, recognising that businesses and the UK more generally are now in a better position than they were during the pandemic, lenders may now require a personal guarantee from the borrower, in line with standard commercial practice.
Chris Wilford, CBI Director of Financial Services Policy, said:
“Amidst challenging economic headwinds and continued cost pressures, this remains a difficult time for business.
“With cashflow difficulties at the forefront of the minds of many business owners, continued access to Government-backed loans will bring great comfort.
“This next phase of the Recovery Loan Scheme will provide a critical lifeline for firms. The CBI will also continue to work with Government and lenders on ensuring businesses have access to the finance they need to go for growth.”
Shevaun Haviland, Director General of the British Chambers of Commerce, said:
“After two years of pandemic disruption and with a faltering global economy, the BCC has been calling for this continued financial support for firms. The two-year extension to the Recovery Loan Scheme will be a lifeline for many businesses facing a rising tide of costs.
“It is now essential that businesses in need of this extra support can access the scheme as quickly as possible to make sure they get help before it’s too late.”
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