Car dealerships and other firms that need support will be able to access government-backed loans of up to £10m until the end of the year.
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 today, the new initiative will replace the Bounce Back Loan Scheme, the Coronavirus Business Interruption Loan Scheme and its larger sibling CLBILS.
The Treasury has promised to cover 80 per cent of what banks lend if businesses do not pay back their loans.
Businesses will be able to access loans varying in size from £25,001, up to a maximum of £10m. Invoice and asset finance will be available from £1,000, according to the Treasury.
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.’
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 per cent guarantee for the Bounce Back Loans.
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 per cent 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.
interest rate cap for new loans
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 1.5m businesses had been lent £45.6bn 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.
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