Further support for small businesses feeling the strain as £4.5billion recovery loan scheme extended
- Access to finance support program for small businesses extended for two years
- Major support for businesses facing increased pressures on business finances
- Nearly 19,000 companies supported since the launch of the system in April 2021
A vital support scheme offering government-backed loans to small businesses will be extended for another two years, Business Secretary Kwasi Kwarteng announced today (Wednesday July 20).
The Recovery Loan Scheme, originally launched in April 2021 to help businesses recover from the Covid-19 pandemic, has supported almost 19,000 businesses with an average of £202,000 in support.
The Recovery Loan Scheme (RLS) is a government program to support access to finance for UK businesses. It gives lenders a government-backed guarantee against the outstanding balance of the facility.
The extension provides additional government support for businesses struggling with cost pressures and comes on top of measures already announced by the Chancellor, such as increased employment allowance, reduced fuel taxes and the introduction of a 50% reduction in business rates for eligible companies.
Business Secretary Kwasi Kwarteng said:
“Small businesses are the engine of the UK economy, which is why we are determined to help our traders and entrepreneurs weather global inflationary pressures.
“Expanding the stimulus loan program will allow us to continue to provide much-needed finance to thousands of small businesses across the country, while boosting local communities, creating jobs and driving economic growth in the UK. United.”
Chancellor of the Exchequer Nadhim Zahawi said:
“Small businesses are the engines of economic growth, supporting jobs and livelihoods in communities 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 funding they need to navigate the months ahead.”
The program has supported over 16,000 businesses in England, as well as 1,000 businesses in Scotland, 600 businesses in Welsh and 300 in Northern Ireland.
Examples of businesses that have benefited from the scheme include Leeds-based firm Wildfire Marketing, which used the loan to hire new staff to help the business grow, and White Light Ltd, a Lighting which needed funding to purchase new equipment for the latest West-End Shows.
The principle behind the extended recovery loan program remains unchanged: the government will guarantee 70% of lenders’ debts, at the level of the individual borrower, in return for a fee from the lender. Lenders need to ensure that the benefits of the government guarantee are passed on to businesses.
The maximum loan size remains up to £2million. However, recognizing that businesses and the UK more generally are now in a better position than they were during the pandemic, lenders can now require a personal guarantee from the borrower, in line with standard business practice.
Chris Wilford, director of financial services policy at CBI, said:
“Amid tough economic headwinds and continued cost pressures, this remains a challenging time for businesses.
“With cash flow difficulties at the forefront of many business owners’ concerns, continued access to government guaranteed loans will bring great comfort.
“This next phase of the Recovery Loan Scheme will provide an essential lifeline for businesses. The CBI will also continue to work with government and lenders to ensure businesses have access to the financing they need to grow.
Shevaun Haviland, chief executive of the British Chambers of Commerce, said:
“After two years of pandemic disruption and with a faltering global economy, the BCC has called for this continued financial support for businesses. The two-year extension of the stimulus loan program will be a lifeline for many businesses facing a rising cost tide.
“It is now essential that businesses in need of this additional support can access the program as quickly as possible to ensure that they get help before it is too late.”