The Chancellor said the new finance scheme would help the economy to move out of the coronavirus crisis as the lockdown eases.
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Government-backed loans of up to £10 million are to be made available for companies that need support until the end of the year.
As announced in the Budget last month, Chancellor Rishi Sunak has opened the Treasury’s Recovery Loan Scheme to tide businesses over, with past Covid-19 lending schemes due to run out.
From Tuesday April 6, the new finance initiative will replace the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and its larger sibling CLBILS.
The Treasury has promised to cover 80% of what banks lend if businesses do not pay back their loans.
Mr Sunak said: “We have stopped at nothing to protect jobs and livelihoods throughout the pandemic and as the situation has evolved we have ensured that our support continues to meet businesses’ needs.
“As we safely reopen parts of our economy, our new Recovery Loan Scheme will ensure that businesses continue to have access to the finance they need as we move out of this crisis.”
Businesses will be able to access loans varying in size from £25,001, up to a maximum of £10 million.
Invoice and asset finance will be available from £1,000, according to the Treasury.
The new scheme, which runs until December 31, has the same Government guarantee as the CBILS and CLBILS, but is less generous than the 100% guarantee for the BBLS.
It will be administered by the British Business Bank, with loans available through a “diverse network of accredited commercial lenders”, officials said.
Interest rates have been capped at 14.99% and ministers are urging lenders to ensure they keep rates down in a bid to ensure business owners pay less than the ceiling figure.
The Recovery Loan Scheme is permitted for use as an additional loan on top of support received from the emergency schemes put into place last year.
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.
The 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.
Business Secretary Kwasi Kwarteng said: “We’re doing everything we can to back businesses as we carefully reopen our economy and recover our way of life.
“The launch of our new Recovery Loan Scheme will provide businesses with a firm foundation on which to plan ahead, protect jobs and prepare for a safe reopening as we build back better from the pandemic.”