I am tabling this statement for the benefit of Honourable and Right Honourable Members to bring to their attention the details of the extension to the Recovery Loan Scheme (RLS).
RLS is facilitated by the Government-owned British Business Bank and delivered through its delivery partners. Under the extension, lenders will offer facilities of up to £2 million to support businesses that would otherwise be unable to access the finance they need, or would only be able to do so at a higher rate of interest. There will be a £6 billion cap on the aggregate value of loans provided through the scheme for the first two years.
The extension covers the period from 1 August 2022 to 30 June 2024. Under the extension, the following changes will come into force:
- The maximum amount of external finance available will be £2 million per business in Great Britain; for businesses in scope of the Northern Ireland Protocol, the maximum amount will be £1 million per business.
- The requirement for businesses to certify that they have been affected by the Covid-19 pandemic will no longer apply. To lend through the scheme, lenders will be required to certify that they would not have been able to offer a facility to the business on their normal commercial terms, or that they would have only been able to do so at a higher interest rate.
- Personal guarantees will be permitted, but not required, for facilities under £250,000 (as has been the case to date for facilities above £250,000). This brings the scheme in line with standard commercial practice in business lending. Principal private residences may not be used as security under any circumstances.
Otherwise, scheme parameters are unchanged. As previously:
- The minimum facility size will be £25,001 for loans and overdrafts and £1,000 for asset and invoice finance.
- Businesses will be required to meet the costs of interest payments and any fees from the outset.
- Businesses who have made use of the previous Coronavirus loan schemes will be able to access the scheme.
Given the above, the maximum contingent liability for lending up to the £6 billion cap on the scheme is £4.2 billion.
I will be laying a Departmental Minute today containing a description of the liability undertaken.
This statement has also been made in the House of Lords