The cash will help firms refinance, restructure and grow after a year of shutdowns and restrictions. Chancellor Rishi Sunak said the scheme will bridge the gap as Covid crisis lending comes to an end. He added: “We have stopped at nothing to protect jobs and livelihoods throughout the pandemic and, as the situation has evolved, we have ensured that our support continues to meet businesses’ needs.
“As we safely reopen parts of our economy, our new recovery loan scheme will ensure that businesses continue to have access to the finance they need as we move out of this crisis.”
Banks will offer between £25,001 and £10million under the scheme from today for the rest of the year.
Interest rates are capped at a maximum of 14.99 percent but lenders have been encouraged to offer them at a much lower rate.
The Treasury has promised to cover 80 percent of what banks lend if businesses do not pay back the money.
The recovery loans replace the bounce back and coronavirus business interruption loans introduced early in the pandemic as firms struggled to stay afloat.
More than £75billion was lent to 1.6 million businesses.
The furlough scheme that protects workers’ wages is continuing to run until September 30, although with higher employer contributions, and new restart grants of up to £18,000 are also being offered to some firms.
Business leaders said the support would help companies recover from the crisis.
Rain Newton-Smith, chief economist at the Confederation of British Industry, said: “The coronavirus loan schemes have provided a critical lifeline to businesses, and so its successor – the new recovery loan scheme – comes as a huge relief to firms.
“These loans can be taken alongside existing Covid loans to help firms refinance, restructure and go for growth.”
“The new recovery loan scheme, alongside other commercial financial support, will help firms rebuild and invest for future growth.”
She added: “It’s vital support remains as restrictions relax and demand returns to normal, allowing businesses to recover, save jobs, and support for reopening.”
And Suren Thiru, head of economics at the British Chambers of Commerce, said: “Accessing finance remains crucial to the lifeblood of a business and so the launch of the recovery loan scheme is welcome.
“The new scheme can play a potentially pivotal role in supporting the recovery by getting credit flowing to the firms who most need it.”
David Postings, chief executive of UK Finance, also welcomed the new initiative: “As focus turns to economic recovery, we know that many firms are still facing uncertainty.
