Personal guarantees will be required for RLS follow-on scheme

Small business owners will be required to offer personal guarantees in order to access funding under the government’s follow-up to the Recovery Loan Scheme (RLS).

According to several reports, the £3bn business recovery loan scheme will offer loans of up to £2m to small- and medium-sized enterprises, backed by a 70 per cent government guarantee.

However, unlike the RLS and its predecessors, borrowers will have to offer personal guarantees in order to access these loans. This means that they will be personally liable for any defaults which occur before the government guarantee is triggered.

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It is believed that the introduction of personal guarantees has been made in response to the well-documented fraud which took place during the pandemic.

During a government hearing last week, Lord Agnew called the government’s handling of the bounce back loan scheme “one of the most colossal cock-ups in recent government management”.

The Department for Business, Energy and Industrial Strategy believes £4.9bn could be unrecoverable through the £47.4bn bounce back loan scheme.

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Over the course of the pandemic, £79.3bn worth of business loans were made through Covid-19 financial support schemes.

The Financial Times has reported that the new government-backed loan scheme will be built on the existing RLS structure, and will run for at least two years.

It will be announced as early as this week, but is unlikely to be up and running before the RLS comes to an end on 30 June.

Read more: SMEs could face obstacles to rumoured new government loan scheme