As the recent Autumn Statement & Spending Reviewhas been announced, with it comes the extension of the Recovery Loan Scheme. But what exactly does this mean? What can be borrowed? And what is theoverall reaction to this news?
In this article, we explore all there is to know on this year’s Recovery Loan Scheme Extension.
What is the Recovery Loan Scheme?
The Recovery Loan Scheme is a government-backed plan that is currently available to businesses of any size to give them access to loans and other kinds of financial aid to help reverse the damages that the pandemic has brought upon many industries.
How Much Can Be Borrowed?
A total of up to £10 million is available per business. The amount offered, and the terms on which they are decided, are at the discretion of participating lenders.
According to the GOV website businesses are entitled to the following:
– Term loans or overdrafts of between £25,001 and £10 million per business
– Invoice or asset finance of between £1,000 and £10 million per business
No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal household cannot be taken as security. The government guarantees 80% of the finance to the lender – however, it’s important to remember that as the borrower, you are always 100% liable for the debt.
What Does the Extension Entail?
To the relief of many business owners, the announcement revealed that the scheme will be given a 6 month extension, until the 30th June 2022. This comes as a huge relief after previous plans to end the scheme in December 2021 sent many business owners into a state of panic. As the last remaining form of COVID financial support, recovery loans are expected to be an essential lifeline for many UKbusinesses.
What Are Experts Saying?
Ravi Anand, managing director of ThinCats, welcomed the extension but warned that he thinks it will only benefit smaller businesses.
“Whilst the extension of RLS until 30 June 2022 is positive, reducing the maximum loan to £2m means it is only relevant to the smaller end of the small- and medium-sized enterprises (SME) market,” said Anand.
We also caught up with Chirag Shah, chief executive of Nucleus Commercial who told us, “The extension also arrives at a time when we expect significant changes across the lending industry. We’re likely to see the number of lenders reduce significantly, given that many have struggled to compete. However, this will create a more level playing field and those lenders which do survive will be more refined, have better access to capital, and will be able to help businesses achieve their goals.”
