For any business owner or manager wondering what life might be like after the Recovery Loan Scheme (RLS) closed on 30th June 2022 . . . Well, after yesterday's announcement by the Business Secretary, it would appear not much different!
Following several weeks of rumours and gossip, Kwasi Kwarteng finally confirmed a 2 year extension to the original scheme, providing a much needed boost to businesses grappling with cost pressures and struggling to access finance.
Since the scheme was launched in April 2021, the RLS has delivered £4.5 billion to just shy of 19,000 SMEs with an average lend at circa £202,000.
To recap, the Recovery Loan Scheme is a government initiative aimed at supporting access to finance for UK businesses. It gives lenders a government-backed guarantee against the outstanding balance of a debt facility.
The extended RLS structure will remain largely unchanged with the government underwriting 70% of lender liabilities in return for a lender fee. Lenders must ensure that the benefits of the government guarantee are passed through to the borrower.
However, recognising that businesses are generally in a more stable position than they were during the pandemic, lenders may now require a Personal Guarantee from company directors, in line with standard commercial practice. The maximum loan size remains at £2,000,000.
This extension adds to other support measures recently confirmed by the new Chancellor of the Exchequer - Nadhim Zahawi - such as increasing the Employment Allowance, cutting fuel duty and introducing a 50% business rates relief for eligible high street businesses.
As with the original RLS, we anticipate accredited lenders will structure their propositions individually - within the scheme parameters - so watch this space.
We also expect the extension will be applied across a range of funding products including term loans, asset finance, invoice finance and commercial mortgages.
Yesterday's announcement is great news for those SMEs struggling to access finance - Should you wish to further explore and understand how your business might benefit from the extended RLS, please get in touch with the team at KeySME - We're here to help!
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