The Autumn Budget has revealed that the recovery loan scheme (RLS) was extended by six months.
Chancellor Rishi Sunak’s Autumn Budget has announced the scheme will be extended until 30 June, but the finance available to businesses will drop from up to a maximum of £10m per company to a maximum of £2m, and the government guarantee will be reduced from 80 per cent to 70 per cent.
Here’s what the industry thought of the changes.
Ravi Anand, managing director of accredited alternative lender ThinCats, welcomed the extension but said it will only benefit smaller businesses.
“Whilst the extension of RLS until 30 June 2022 is positive, reducing the maximum loan reducing to £2m means it is only relevant to the smaller end of the small- and medium-sized enterprises (SME) market,” said Anand.
“Medium-sized SMEs, which represent 30 per cent of UK GDP, are vital for creating jobs and growth and we may soon find the lending gap widens again. Our experience is that bank lending in this space is patchy at best, and therefore funding for businesses which are looking to grow and invest will be more constrained and, when available, more expensive.
“There was a clear case to be made for targeting of support to those sectors that have been particularly hard hit by the pandemic by follow-on issues such as supply chain disruption. Without RLS, sectors such as hospitality or leisure may struggle to secure working capital. We would question whether the reduction in loan size should have been made now.”
Chirag Shah, chief executive of accredited lender Nucleus Commercial Finance, said the extension will provide businesses with the vital funds they need to recover from the effects of the pandemic and invest in their futures. He predicted that the number of lenders participating will drop, but the quality will not.
“The extension also arrives at a time when we expect significant changes across the lending industry,” said Shah.
“We’re likely to see the number of lenders reduce significantly, given that many have struggled to compete. However, this will create a more level playing field and those lenders which do survive will be more refined, have better access to capital, and will be able to help businesses achieve their goals.”
Catherine Lewis La Torre, chief executive of British Business Bank, which administered the scheme, welcomed the extension.
“A six-month extension to the recovery loan scheme will also provide valuable support for smaller businesses as they look beyond the pandemic towards the opportunities available to them in the recovery,” she said.
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David Postings, chief executive of industry trade body UK Finance, praised the scheme for delivering an unprecedented level of support to help businesses of all sizes through these the pandemic and welcomed the extension.
“The recovery loan scheme is providing businesses with the finance they need to continue to rebuild and we welcome its extension until the end of June 2022,” he said.
“We know that many firms are facing pressures heading into the winter and this move will help businesses across the UK.”