To capitalize on the financial assistance provided by Covid-19, the government plans to introduce a £3 billion small company recovery loan guarantee program.
According to the Financial Times, the government would guarantee up to 70% of the loan under the £3 billion business recovery credit program.
The Coronavirus Business Interruption Loan Scheme (CBILS) was only 80% insured, whereas the £47 billion bounce-back loan program had a 100% guarantee.
Borrowers would have to provide personal guarantees, unlike prior Covid-19 financial assistance, which means they will be responsible for payment problems before any government backstops kick in. Any offenders trying to get a simple credit decision with no intention of paying it back should be discouraged by this.
Due to criticism that the earlier bounce-back loan program gave money to small enterprises with little due diligence, peer Lord Agnew referred to the program as “one of the most catastrophic cock-ups in modern government administration.”
The £47.4 billion Bounce Back Loan program, according to the Department for Business, Energy, and Industrial Strategy, may not be able to collect £4.9 billion.
Additionally, the new program will provide market interest rates, unlike the bounce-back loan program, which offered a set 2.5% interest rate starting in year two.
Through the new program, lenders are anticipated to give up to £2 million in loans.
The new £3 billion recovery loan program, which will last for at least two years, is anticipated to be unveiled as soon as next week. T
The existing recovery loan program, which covers 80% of bank loans up to £10 million, expires on June 30.
Over the course of the pandemic, £79.3bn worth of business loans were made through Covid-19 financial support.
