The Government’s flagship Covid business recovery scheme officially came to an end late last month (30 June).
The recovery loan scheme opened to applications on 6 April 2021 to help businesses cope with trade lost to the Covid pandemic.
The scheme offered £1.06 billion to small businesses through almost 6,200 facilities, with the latest figures from the British Business Bank showing £822.8 million had been claimed by October 2021.
The Government guaranteed 80% of loans to lenders who lost money to borrowers defaulting on their repayments.
When the scheme first launched, Chancellor of the Exchequer Rishi Sunak said:
“As we safely reopen parts of our economy, our new Recovery Loan Scheme will ensure that businesses continue to have access to the finance they need as we move out of this crisis.”
Announced in Spring Budget 2021, the recovery loan scheme was just one of several business recovery programmes, including the coronavirus business interruption loan scheme (worth £26.29bn) and the bounce-back loan scheme (worth £47.36bn).
Businesses could claim loans between £25,001 to £10m with a capped interest rate of 14.99% until 31 December 2021, although the Government later decided to extend the scheme to the end of June 2022.
The rules were also changed so that businesses could only apply for a maximum loan offer of £2m from 1 January 2022 onwards, while the Government reduced their guarantees to lenders to 70%.
Ministers are reportedly preparing to launch a replacement £3bn-a-year recovery loan scheme to help businesses recover from the pandemic.
The new Government-backed loans will have tighter requirements for borrowers, who will have to offer personal guarantees.
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said:
“If we head into recession, having a new loan scheme in place in the lending market could prove vital, especially if banks pull up the drawbridge on commercial lending.”
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