By Timothy Adler on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs
Chancellor Rishi Sunak will extend the Covid Recovery Loan Scheme for businesses for another six months, according to Bloomberg.
The Chancellor is expected to announce the six-month extension to the Recovery Loan Scheme in the Budget on October 27.
The scheme was launched in April as a bridge between the more generous Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme and regular bank lending. It was made clear at the time that the deadline would be the end of the year, subject to a review.
>See also: Recovery Loan Scheme 2021 full update – where do I apply for my loan?
It provides credit worth up to £10m and comes with an 80 per cent Government guarantee for lenders.
Its terms are less generous than previous emergency Covid-19 financial support though. Lenders are allowed to ask for personal guarantees from directors on loans over £250,000. Plus fees must be paid from the start and businesses must show that they would be viable were it not for being blindsided by the pandemic.
Because of these stricter financial terms, there has been less take up of the scheme. Many applicants have been denied a loan because their company’s turnover value wasn’t high enough, because of their credit rating or because they already had a Bounce Back Loan.
>See also: Failings revealed in Covid Recovery Loan Scheme
Although the Government did not expect the scheme to be as popular as its predecessors, it has been surprised by the lack of enthusiasm, according to The Times.
An industry source told the newspaper: “The take-up [of the scheme] was never really expected to be as big as the other schemes, but it also hasn’t been as big as they had expected.”
No figures on how much has been lent under the Recovery Loan Scheme have been published, despite the British Business Bank saying data would be made public this autumn.
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Timothy Adler, Khareem Sudlow
