Third phase of British Business Bank scheme offers £1bn of lending to UK smaller businesses

The British Business Bank has announced that the third iteration of its Recovery Loan Scheme (RLS) has supported £1bn of finance offers to smaller businesses since its launch in August 2022.

The guarantee scheme, which has more than 60 participating lenders, has enabled lending to smaller businesses across the whole of the UK. Approximately two thirds of facilities under the third phase of the scheme have been offered outside of London and the South East.

The Recovery Loan Scheme has also supported a wide range of finance types, including term loans, asset finance, invoice finance and revolving credit facilities, and a new asset-based lending variant was recently launched.

The scheme has attracted a diverse range of lenders, including specialist and challenger banks, funds, community development finance institutions/social lenders, asset-backed and alternative finance providers, property and development finance providers, as well as high street banks.

More than half of the offered facilities were for growth capital for UK smaller businesses, with the majority of the remaining facilities for working capital. Of the businesses supported, more than 90% had fewer than 50 employees.

Louis Taylor, chief executive of the British Business Bank, said: “This milestone is a fantastic achievement for the bank and all of the lenders participating in the Recovery Loan Scheme.

“It is good to see the diversity of lenders that have joined the scheme and the types of finance they’ve been able to offer, especially asset finance, which is so important to growing and innovating businesses.

“Direct loan guarantee schemes such as this are vital to ensuring the market serves the needs of smaller businesses across the UK.”

Martin McTague, national chair of the Federation of Small Businesses, added: “Keeping finance flowing for small firms is vital to economic growth, and we’re pleased that the third phase of RLS has reached the £1bn mark.

“This shows its importance for the UK business ecosystem as a whole and underlines why its future financing must be confirmed by the government as soon as possible. 

“Helping startups get off the ground, and grow into scale-ups, is key in both the here-and-now and for the UK’s future prospects, especially in our current high interest rate environment.

“Having the scheme set up and ready to go will be invaluable in case of an economic slowdown to ensure funding gets to firms as swiftly as possible.”

The Recovery Loan Scheme is a government-backed loan scheme designed to support access to finance for UK businesses as they look to invest and grow.

The scheme aims to help smaller businesses across the UK, with turnover of up to £45m, to access finance they may not have had access to commercially, on equivalent terms.

Businesses can use the finance for any legitimate business purpose, including managing cashflow, investment in new equipment or vehicles, perhaps to support transition toward net zero, and growth through new products or expansion. However, businesses must be able to afford to take out additional debt finance for these purposes.

It can support facility sizes of up to £2m for borrowers outside the scope of the Northern Ireland Protocol. Borrowers in scope of the Northern Ireland Protocol may borrow up to £1m, unless they operate in a sector where aid limits are reduced – in which case the maximum that can be borrowed is subject to a lower cap. These include agriculture, fisheries/aquaculture and road freight haulage.

The first two phases of the scheme, designed to support access to finance and growth for UK businesses as they recovered from the Covid-19 pandemic, enabled £4.3bn of finance.

The British Business Bank intends to publish RLS 3 performance data in 2024, in line with the approach taken for other British Business Bank-managed schemes.

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