Calls for ‘pay as you grow’ support for SMEs
The government has been urged to introduce more measures to help businesses grow, rather than simply extending the recovery loan scheme (RLS) when many firms are already indebted.
Purbeck Personal Guarantee Insurance has welcomed the extension of the state-backed loan scheme, which was confirmed in the Treasury’s Autumn Budget this week. However, the insurer questioned whether support would have been better focused on providing financial solutions to businesses already managing loan repayments, to help them grow.
Purbeck cited a survey from Lloyds Bank which found that 54 per cent of small- and medium-sized businesses said that while loan repayments are affordable, servicing the debt will prevent the business from investing in itself to grow for the future.
Read more: Autumn Budget: Reaction to recovery loan scheme extension
The RLS was first launched on 6 April 2021 as a successor to schemes such as the coronavirus business interruption loan scheme (CBILS) and was due to end at the end of the year.
As well as extending the scheme until 30 June 2022, the government guarantee on the value of each loan will be reduced from 80 per cent to 70 per cent.
The British Business Bank (BBB) announced earlier this week that the RLS scheme has approved £1.06bn via 6,190 loans to businesses across the UK. A total of £822.8m has been drawn down through 5,137 facilities to date.
“The RLS has provided just over £1bn to UK businesses against the £12bn anticipated in the March 2021 OBR Economic and Fiscal Outlook,” said Todd Davison, MD of Purbeck Personal Guarantee Insurance.
“While there are now 75 accredited lenders, take up has not been to the degree the government expected. Crucially, it was designed to appeal to businesses that can afford to take out additional finance, thus excluding many firms in financial distress. It may also have failed to appeal due to the criteria that is applied with many businesses likely to have been capped out from borrowing under CBILS and with fees and interest immediately payable.
“We would have liked to have seen more focus on ‘pay as you grow’ type initiatives to support businesses already indebted by CBILS/RLS loans to help these firms realise their growth ambitions in a post-pandemic environment.”