Government backed Recovery Loan Scheme (‘RLS’) extended…

On 20 July 2022, the UK government announced that the Recovery Loan Scheme (RLS) will be extended for a further two years.

The government scheme was originally launched in April 2021 and sought to help small businesses recovering from the COVID pandemic. It gives lenders a government-backed guarantee against the outstanding balance of the facility

Under the scheme, 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 and the RLS has supported almost 19,000 businesses with an average of £202,000 in credit.

The extension provides further government support for businesses grappling with cost pressures and adds to measures already announced by the Chancellor, such as increasing the Employment Allowance, slashing fuel duty, and introducing a 50% business rates relief for eligible high street businesses.

Business Secretary, Kwasi Kwarteng, said: “Small businesses are the lifeblood of the British economy, which is why we are determined to support our traders and entrepreneurs in dealing with worldwide inflationary pressures.  The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country, while stimulating local communities, creating jobs, and driving economic growth in the UK.”

The maximum loan size remains at up to £2m. However, recognising that businesses and the UK more generally are now in a better position than they were during the pandemic, lenders may now require a personal guarantee from the borrower, in line with standard commercial practice.

There is no doubt the scheme will save some UK businesses during these challenging times and will again cloud the real picture of our economy.  Whilst it will inevitably ease cashflow difficulties for some businesses, it may also be said that we just kicking that potential insolvency can a bit further down the track…….

If you have any queries concerning this article, please contact Allison Thompson on 0191 2267878.

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