Chancellor unveils recovery loan scheme
A new government-backed loan scheme has been confirmed, to replace the current Covid-19 support programmes when they close for applications at the end of March.
Chancellor Rishi Sunak unveiled the successor scheme in his Budget on Wednesday, which will provide loans between £25,000 and £10m to businesses, with 80 per cent of the loan’s value guaranteed by the government.
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This new scheme, which has previously been reported to be more stringent with stricter criteria and interest rates capped at 15 per cent, comes into effect on 6 April 2021.
The bounce back loan scheme (BBLS), coronavirus business interruption loan scheme (CBILS) and coronavirus large business interruption loan scheme (CLBILS) are due to end on 31 March.
Sunak also announced new restart grants for gyms and businesses in the retail, hospitality and leisure industries and extended business rates relief until the end of June and the furlough scheme until the end of September.
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“As well as supporting peoples’ jobs and incomes this Budget also protects businesses,” Sunak said in the House of Commons.
“Even with the new restart grant, some business will still need loans to see them through. As the bounce back and CBILS programmes come to an end, we’re introducing a new recovery loan scheme to take their place.
“Businesses of any size can apply for loans from £25,000 up to £10m through to the end of this year and the government will provide a guarantee to lenders of 80 per cent.”
Lisa Jacobs, Europe managing director at Funding Circle, said the peer-to-peer business lender welcomed the new scheme.
“We welcome the government’s recovery loan scheme, which will continue to support small- and medium-sized enterprises (SME) as we emerge from the pandemic,” she said. “We look forward to facilitating loans under the new scheme, ensuring small businesses have the finance they need to invest, create jobs and drive the economic recovery.”
Chirag Shah, chief executive of Nucleus Commercial Finance, also welcomed the support measures for businesses announced in the Budget.
“SME owners across the country have been longing for a clear road map out of lockdown,” Shah said.
“Today’s announcement by the chancellor combined with the recent lockdown exit strategy will provide businesses with a glimmer of hope, and give them the additional lifelines they need to survive.
“With our own research showing that seven in 10 business owners were calling for a furlough extension, today’s announcement comes as welcome news to all.
“Combine this with an extension of business rates relief, this will provide a significant boost to those in the hospitality and retail sectors. These measures will undoubtedly help SMEs in the short-term, but now the government needs to create a long-term environment where businesses can prosper.”
As of February, £45.6bn had been deployed to more than 1.5m SMEs through BBLS, more than £22bn has been loaned to 92,449 businesses via CBILS and 705 loans worth £5.3bn were granted under CLBILS.
A further £1.1bn has been spent on convertible loans for 1,140 companies as part of the future fund scheme.