Covid Born Recovery Loan Scheme Extended to Aid UK SMEs

Today, the UK government has announced that the Recovery Loan Scheme (RLS), launched in April 2021 to help businesses counter the COVID crippled economy, will be extended for a further two years. Originally set to end last December, during the Autumn Budget the government extended the program until June 30, 2022. Under the program, 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. During its initial run, the RLS supported over 18,000 businesses with an average of £202,000 in credit.

Both traditional lenders and Fintech lenders participated in the distribution of the lending.

Chancellor of the Exchequer, Nadhim Zahawi, stated that small businesses are the engines of economic growth, “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 government says the new RLS now aims to help businesses hit by “cost pressure” as inflation impacts all aspects of the economy.

Managed by the British Business Bank, approved lenders offered over £4.5 billion to UK SMEs, with over £3.83 billion being accessed.

The extended RLS will see the government underwrite 70% of lender liabilities, at the individual borrower level, in return for a lender fee. The maximum loan size remains at up to £2 million.

Catherine Lewis La Torre, CEO of the British Business Bank, commented:

“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.”

Business Secretary Kwasi Kwarteng explained that the extension of the RLS will help ensure that thousands of small businesses will have access to capital, supporting the economy while creating jobs.

The British Business Bank will publish RLS performance data half-yearly, based on the end of September and end of March data.

Douglas Grant, Group CEO at Manx Financial Group PLC, distributed a comment on the RLS extension:

“Today’s announcement of the extension of RLS is very good news for UK business. The Recovery Loan Scheme (RLS), which Conister was accredited for in August last year, has provided the necessary catalyst that many sectors require to thrive. As demand for working capital soars to new highs, more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues and increases in wages. With the cost of borrowing set to increase, many SMEs are facing their own cost of living crisis. Our research recently revealed that 22% of UK SMEs that needed external finance and/or capital over the last couple of years were unable to access it. Indeed 27% have had to stop or pause an area of their business because of a lack of finance. SMEs have continued to struggle with accessing finance and that worryingly, this lack of availability will cost them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is significant and will require new solutions which are designed to address this funding gap.”

Grant would like to see a permanent policy for government backed loans that are issued by both traditional and alternative lenders to “guarantee the future” of UK SMEs.

RLS Drawn by Sector (data from the British Business Bank)

SIC Group

Loan Amount (£) No. of Facilities

No. of Businesses

Wholesale & Retail Trade And Repair        660,850,099                3,797                     3,523
Construction        583,542,049                2,845                     2,607
Manufacturing        467,701,738                2,311                     2,064
Admin & Support Service Activities        336,537,058                1,803                     1,598
Real Estate Activities        297,589,793                   456                        432
Accommodation & Food Service Activities        270,217,158                1,056                        990
Professional, Scientific & Technical Activities        261,058,717                1,811                     1,716
Information & Communication        206,951,076                1,102                     1,037
Human Health & Social Work Activities        180,901,374                   720                        681
Transportation & Storage        165,039,281                   971                        801
Financial & Insurance Activities        162,037,798                   327                        292
Arts, Entertainment & Recreation          62,998,122                   359                        323
Other Service Activities          59,707,027                   570                        538
Water, Sewerage & Waste Management          47,274,751                   217                        175
Education          31,639,367                   265                        256
Agriculture, Forestry And Fishing          22,449,098                   211                        183
Electricity, Gas, Steam & Air Con Supply            5,615,101                     47                          42
Mining & Quarrying            5,156,022                     27                          21
Unknown            3,185,000                       2                            2
Public Administration & Defence            3,086,876                     19                          19
Activities Of Households                 31,001                       1                            1

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