In the Autumn Budget, the Chancellor confirmed the Recovery Loan Scheme will be extended until 30 June 2022 to ensure that lenders continue to have the confidence to lend to small and medium-sized businessesi . The government guarantee will also be reduced from 80% to 70%. The Recovery Loan Scheme was first launched on 6th April 2021 and was due to end on 31st December 2021ii. Purbeck Personal Guarantee Insurance, provider of the UK’s only personal guarantee insurance to SME business owners and directors has welcomed the move but questioned whether support would have been better focused on providing financial solutions to businesses already managing loan repayments, to help them grow.

In a new survey from Lloyds Bank – 54% of the small and medium businesses said that while loan repayments are affordable, servicing the debt will prevent the business from investing in itself to grow for the futureiii .

Todd Davison, MD of Purbeck Personal Guarantee Insurance said:

“The Recovery Loan Scheme has provided just over £1 billion to UK businessesiv against the £12 billion anticipated in the March 2021 OBR Economic and Fiscal Outlook. 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.

“Compared to a traditional loan, the RLS will be more attractive certainly where a Personal Guarantee is concerned as the personal risk to the business owner or director is limited to 30% of the loan following the proceeds of business assets rule, if the business fails, but that can still be a hurdle with still so much uncertainty and the threat of interest rate rises.”

“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.”