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Departmental Contingent Liability Notification: Recovery Loan Scheme

Volume 704: debated on Friday 26 November 2021

I am tabling this statement for the benefit of right hon. and hon. Members to bring to their attention the details of the extension to the recovery loan scheme (RLS) announced by the Chancellor of the Exchequer on 27 October 2021.

RLS is facilitated by the Government-owned British Business Bank and delivered through its delivery partners. Under the extension, lenders will offer facilities of up to £2 million to support businesses that are affected by the coronavirus outbreak. There will be no limit on the number and aggregate value of loans that can be made under the scheme.

The extension covers the period 1 January to 30 June 2022. Under the extension, the following changes will come into force:

The percentage of the remaining balance of each loan that is guaranteed by the Government will be 70 per cent, changed from 80 per cent.

The maximum facility size will be £2 million per business, changed from £10 million.

The scheme will only be open to small and medium sized enterprises (annual turnover less than £45 million).

Otherwise, scheme parameters are unchanged. As previously:

The minimum facility size will be £25,001 for loans and overdrafts and £1,000 for asset and invoice finance.

Businesses will be required to meet the costs of interest payments and any fees from the outset.

Businesses that have made use of the previous coronavirus loan schemes will be able to access the scheme.

The lender must establish that the borrower has a viable business proposition assessed according to its normal commercial lending criteria. This may, but is not required to, be determined without regard to any concerns over the borrower’s short-to-medium term business performance due to the uncertainty and impact of coronavirus.

Our central estimate for lending for the initial scheme period—6 April to 31 December 2021—has been updated to £1.6 billion, meaning a maximum contingent liability of £1.28 billion.

The maximum contingent liability for assumed additional lending under the extension of £850 million (our central estimate) is £595 million.

I will be laying a departmental minute today containing a description of the liability undertaken.