The Government is to back loans of up to £10 million for companies that need support until the end of the year as its Covid-19 lending schemes run out.

Chancellor Rishi Sunak told MPs he plans a new Recovery Loan Scheme to tide businesses over.

From April 6 it will replace the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and its larger sibling CLBILS.

The Treasury will promise to cover 80% of what banks lend if businesses do not pay back their loans.

Mr Sunak said: “Some businesses will also need loans to see them through. As the Bounce Back Loan and CBIL schemes 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 £10 million, through to the end of this year.”

The new scheme has the same Government guarantee as CBILS and CLBILS, but is less generous than the 100% guarantee for BBLS.

Bounce back loans were first unveiled in late April last year and became available to businesses just days later in early May.

With the higher guarantee, and less rigorous controls from lenders, the bounce back loans have proven by far the most popular of the three schemes, both in terms of the number of loans granted and the total amount lent.

By February 21, more than 1.5 million businesses had been lent £45.6 billion in total, with another half a million having applied.

The BBLS was intended to quickly funnel cash from banks to small businesses, up to £50,000 each. The Government gave a 100% guarantee on the loans to ensure banks were not reluctant to lend.

BBLS, CBILS, CLBILS and the Bank of England’s Covid Corporate Financing Facility have between them provided tens of billions of pounds in loans to UK businesses.

In September, Mr Sunak promised a new form of Covid loan scheme would be introduced at the beginning of the new year to replace the three Treasury-backed schemes. However this was later put on hold as infections and deaths soared, leading to more lockdown measures.

The Treasury also said it plans to give HM Revenue and Customs around £100 million to hire 1,265 new staff to combat fraud in the support packages, including the furlough and self-employment support schemes.