The Recovery Loan Scheme for small businesses has been extended by two years, business secretary Kwasi Kwarteng has announced.
The scheme, first introduced in April 2021 to help struggling businesses during the Covid-19 pandemic, offers government-backed loans to small businesses. It has already helped more than 16,000 businesses in England, 1,000 in Scotland, 600 in Wales and 300 in Northern Ireland, with an average of £202,000 each. The maximum loan size remains £2m.
Business secretary Kwasi Kwarteng commented
“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 Nadhim Zahawi emphasised that the principle of the scheme would not change – the government would underwrite 70% of lender liabilities at the individual borrower level in return for a lender fee. Lenders must ensure the benefits of the government guarantee are passed on to businesses.
The extension to the loan scheme will come as welcome news to many small businesses who are still struggling in the aftermath of numerous lockdowns during the pandemic and the current high rates of infection, staff illness and absence. Adding to that the continuing rising cost of living and with food prices up by as much as 40% being felt across the hospitality industry, an extension to the scheme will go some way in helping small businesses to survive during this challenging time.
How does the Recovery Loan Scheme work?
Up to £2m is available per business. The minimum funding is £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts. The total amount offered is at the discretion of the participating lender. They will carry out credit checks and fraud checks before granting you the finance.
The government is guaranteeing 70 per cent of the finance to the lender and the borrower will always be 100 per cent liable for the debt. The annual interest rate and upfront and other fees cannot be more than 14.99 per cent.
Recovery Loan Scheme lenders from the previous scheme include many major UK banks, such as Barclays, HSBC, Lloyds Bank, Natwest, Santander, Ulster Bank, RBS, Bank of Scotland, Aldermore, Arbuthnot Latham, Clydesdale Bank, Danske Bank, Paragon, OakNorth Bank, Secure Trust, Skipton Business Finance and Yorkshire Bank.
How long is the term?
The length depends on what kind of finance you’re applying for.
- Up to three years for overdrafts and invoice financing facilities
- Up to six years for loans and asset finance facilities
More information on the Recovery Loan Scheme and how to apply will be released in due course. You can visit the British Business Bank website in the meantime for more information on what the scheme entails.