[UK] Government will launch £3bn small business recovery loan scheme

The UK government is set to launch a £3bn-a-year small business recovery loan guarantee scheme to build on COVID-19 financial support, SmallBusiness.co.uk reports.

The £3bn business recovery loan scheme will offer a government guarantee for up to 70 per cent of the loan, according to Financial Times reporting.

The £47bn bounce back loan scheme, by comparison, had a 100 per cent guarantee and the Coronavirus Business Interruption Loan Scheme (CBILS) offered 80 per cent cover.

Unlike previous COVID-19 financial support, however, borrowers will be required to put up personal guarantees meaning they will be responsible for payment defaults ahead of triggering any government backstop. This is intended to act as a deterrent to anyone hoping to get a quick-and-easy credit decision with no intention of repaying the money.

The previous bounce back loan scheme reportedly received criticism for handing out money to small businesses after very few checks. Peer Lord Agnew described the whole scheme as “one of the most colossal cock-ups in recent government management”.

The Department for Business, Energy and Industrial Strategy believes £4.9bn could be unrecoverable through the £47.4bn Bounce Back Loan scheme.

In addition, unlike the bounce back loan scheme which offered a fixed 2.5 per cent interest rate from year two, the new scheme will offer market interest rates.

Lenders are expected to offer loans of up to £2m through the new scheme.

The new £3bn recovery loan scheme is expected to be announced as early as this week and will be in place for at least two years.

The current recovery loan scheme, which guarantees 80 per cent of a bank loan up to £10m, ends on 30 June.

Over the course of the pandemic, £79.3bn worth of business loans were made through COVID-19 financial support.

Source: SmallBusiness.co.uk

(Link and quote via original reporting)

The UK government is set to launch a £3bn-a-year small business recovery loan guarantee scheme to build on COVID-19 financial support, SmallBusiness.co.uk reports.

The £3bn business recovery loan scheme will offer a government guarantee for up to 70 per cent of the loan, according to Financial Times reporting.

The £47bn bounce back loan scheme, by comparison, had a 100 per cent guarantee and the Coronavirus Business Interruption Loan Scheme (CBILS) offered 80 per cent cover.

Unlike previous COVID-19 financial support, however, borrowers will be required to put up personal guarantees meaning they will be responsible for payment defaults ahead of triggering any government backstop. This is intended to act as a deterrent to anyone hoping to get a quick-and-easy credit decision with no intention of repaying the money.

The previous bounce back loan scheme reportedly received criticism for handing out money to small businesses after very few checks. Peer Lord Agnew described the whole scheme as “one of the most colossal cock-ups in recent government management”.

The Department for Business, Energy and Industrial Strategy believes £4.9bn could be unrecoverable through the £47.4bn Bounce Back Loan scheme.

In addition, unlike the bounce back loan scheme which offered a fixed 2.5 per cent interest rate from year two, the new scheme will offer market interest rates.

Lenders are expected to offer loans of up to £2m through the new scheme.

The new £3bn recovery loan scheme is expected to be announced as early as this week and will be in place for at least two years.

The current recovery loan scheme, which guarantees 80 per cent of a bank loan up to £10m, ends on 30 June.

Over the course of the pandemic, £79.3bn worth of business loans were made through COVID-19 financial support.

Source: SmallBusiness.co.uk

(Link and quote via original reporting)