Business Secretary Kwasi Kwarteng announced today (Wednesday 20 July) that an important support programme providing government-backed loans to small businesses will be extended for an additional two years.
The Recovery Loan Scheme has helped around 19,000 businesses with an average of £202,000 in support since it was first introduced in April 2021 to aid businesses in recovering from the Covid-19 pandemic.
A government programme called the Recovery Loan Scheme (RLS) aims to enhance UK businesses’ access to capital. It provides lenders with a government-backed guarantee against the remaining facility balance.
The extension adds to the measures already announced by the Chancellor, such as raising the Employment Allowance, cutting fuel duty, and instituting a 50 per cent business rates relief for qualified high street businesses, and it offers more government assistance to businesses facing financial difficulties.
Kwasi Kwarteng, Business Secretary, 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.”
Nadhim Zahawi, Chancellor of the Exchequer, 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.”
More than 16,000 English businesses, as well as 1,000 in Scotland, 600 in Wales, and 300 in Northern Ireland, have benefited from the programme.
Businesses that have benefited from the programme include White Light Ltd., a lighting firm that needed financing to buy new equipment for the newest West-End shows, and Wildfire Marketing, a Leeds-based company that used the loan to hire new employees to help the business grow.
The extended Recovery Loan Scheme operates on the same basic tenet: in exchange for a lender fee, the government will guarantee 70 per cent of lender liabilities at the individual borrower level. Lenders are responsible for making sure that businesses receive the advantages of the government guarantee.
Up to £2 million is still the maximum borrowing amount. Lenders may now demand a personal guarantee from the borrower, as is customary in the business world, given that businesses and the UK as a whole are in a stronger situation than they were before the pandemic.
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.”