Credit, Collections & Insolvency News
Chancellor Rishi Sunak has announced the extension Recovery Loan Scheme to 30th June 2022 as part of his latest budget announcement.
Commenting on the budget Chirag Shah, CEO of Nucleus Commercial Finance, said “Today’s Budget demonstrates the government’s commitment to supporting British businesses. The extension of the Recovery Loan Scheme will provide SMEs with a lifeline, giving them the vital funds they need to recover from the effects of the pandemic and invest in their futures, while boosting national GDP. However, we all know that the scheme can’t go on forever, and as a result government and industry must work collaboratively to communicate the options available to SMEs over the short, medium and long term.”
“The extension also arrives at a time when we expect significant changes across the lending industry. We’re likely to see the number of lenders reduce significantly, given that many have struggled to compete. However, this will create a more level playing field and those lenders who do survive will be more refined, have better access to capital, and will be able to help businesses achieve their goals.”
Whilst David Postings, Chief Executive of UK Finance, said “The banking and finance industry continues to deliver an unprecedented level of support to help businesses of all sizes through these difficult times. The Recovery Loan Scheme is providing businesses with the finance they need to continue to rebuild and we welcome its extension until the end of June 2022. We know that many firms are facing pressures heading into the winter and this move will help businesses across the UK.”
“The banking and finance sector makes a significant contribution to the UK public finances and we welcome the Chancellor’s announcement that the bank corporation tax surcharge will be reduced to partially offset the planned increase in corporation tax. This move recognises the importance to the UK of an internationally competitive sector which supports growth, jobs and innovation across the UK. At the same time, the increase in the bank surcharge annual allowance to £100 million will also help to support healthy competition in the sector.
Phil McGilvray, Managing Director of Debt Services at Equifax said “There may have been an absence of specific reference to Bounce Back Loans (BBLs) in the Chancellor’s statement at the despatch box today, but the fine print of the OBR’s economic outlook reveals a number that should be cause for concern for any UK taxpayer. It forecasts that £19.7bn of emergency business support, granted through the Bounce Back Loans Scheme, is predicted to be written off when loans are not paid back. That is a huge amount of money to wave goodbye to, especially given that, as the Chancellor said himself: ‘this is not the Government’s money but taxpayers money.”
“It is only right that BBLS lenders and the government recover as much as they can.
“£19.7bn could level up skills by building 656 schools, each hosting around 1,300 pupils, or paying the first year salary of 766,000 first year teachers outside of London. TDX Group and Indesser already provide clients in the public sector, and in regulated markets, a three-step process to collect aged debt efficiently, effectively, and fairly. Further teaming up with the government on debt recovery would be a smart way to recover lost funds from businesses that can afford to pay, saving taxpayers money and accelerating the UK economic recovery.”
Russell Payne, Director at ReSolve said: “It is pleasing to hear that the publics finances are in a better state than originally expected, which can be attributed to higher GDP growth during Q2, giving our Chancellor more breathing room and spending power. As announced this afternoon, one of the beneficiaries of this positive fiscal news is the 50% discount to business rates for the retail and hospitality sectors, which is set to help alleviate some of the financial stress caused by the pandemic-induced slowdown of activity. With the Government support having all but come to an end, this will be a welcome relief to businesses, especially SMEs, who can focus on building back their business and servicing their debt.”
Federation of Small Businesses (FSB) National Chair Mike Cherry said “This Budget has delivered some measures that should help to arrest the current decline in small business confidence. But, against a backdrop of spiralling costs, supply chain disruption and labour shortages, is there enough here to deliver the Government’s vision for a low-tax, high-productivity economy? Unfortunately not. Where inflation and forthcoming tax hikes are concerned, the clouds are gathering.”
“It’s good to see the Chancellor embrace our recommendation for business rates reform: changing the system so it stops hitting small firms that invest to make their premises more sustainable with higher bills.”
“That said, much more will be needed to support small employers in the months ahead. Our call for an increase in the Employment Allowance to £5,000 would have made a real difference to efforts to increase wages, retain staff and create jobs as we head into the critical festive season.”
“Wider rates reform is positive, especially the promise of a substantial discount on bills for the hard-hit retail, leisure and hospitality industries, alongside cancellation of an increase to the rates multiplier.”
“Vital too is expanded funding for the British Business Bank, empowering it to extend the reach of its work and add to its thousands of existing success stories across the UK.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said “The Recovery Loan Scheme has provided just over £1 billion to UK businessesiv against the £12 billion anticipated in the March 2021 OBR Economic and Fiscal Outlook. While there are now 75 accredited lenders, take up has not been to the degree the Government expected. Crucially, it was designed to appeal to businesses that can afford to take out additional finance, thus excluding many firms in financial distress. It may also have failed to appeal due to the criteria that is applied with many businesses likely to have been capped out from borrowing under CBILS and with fees and interest immediately payable. ”
“Compared to a traditional loan, the RLS will be more attractive certainly where a Personal Guarantee is concerned as the personal risk to the business owner or director is limited to 30% of the loan following the proceeds of business assets rule, if the business fails, but that can still be a hurdle with still so much uncertainty and the threat of interest rate rises.”
“We would have liked to have seen more focus on ‘Pay as you grow’ type initiatives to support businesses already indebted by CBILS/RLS loans to help these firms realise their growth ambitions in a post-pandemic environment.”