If you’re in need of finance to recover from the rippling effects of COVID-19, don’t forget that the government Recovery Loan Scheme has been extended to 30 June 2022 but there are some key changes that you will need to be aware of.
The first is that the Recovery Loan Scheme is only available to small and medium-sized businesses now. The second is the maximum finance available has been reduced from £10 million to £2 million per business. Finally, the government will no longer guarantee 80% of the loan to the lender, it will guarantee 70%.
If you’re not familiar with the Recover Loan Scheme, we’ve summarized it below for you:
What is the Recovery Loan Scheme?
The Recovery Loan Scheme was revealed in the budget 2021 announcement. It is set to launch on 6th April 2021 and will remain open until 21st December 2021 subject to review. It’s designed to ensure businesses of any size affected by Covid-19 can access loans and other kinds of finance. The loan can be used for any legitimate business purpose.
The government will guarantee 70% of the loan to the lender to encourage confidence in lending to small businesses. There are two types of finance that will be made available:
- Term Loans and overdrafts between £25,001 and £2 million per business
- Invoice finance and asset finance between £1,00 and £2 million per business
- A term loan is a loan for a specific amount that has a set repayment schedule with a fixed or floating interest rate. Invoice finance is where you borrow an amount of money against the value of unpaid invoices. Asset finance is often associated with purchasing expensive equipment or using assets your business owns as security against a loan.
- No personal guarantees will be taken on facilities up to £250,000 and the borrower’s principal private residence cannot be taken as security.
Who can apply for the Recovery Loan Scheme?
According to government guidance, you can apply for the Recovery Loan Scheme if:
- Your business is small or medium and trading in the UK
- Your business is viable or would be viable if not for the Covid-19 pandemic
- Your business has been impacted by the Covid-19 pandemic
- Your business is not insolvency proceedings
You can’t apply if:
- You’re a bank, building society, insurer and reinsurers (not including insurance brokers)
- You’re public sector body
- You’re a state-funded primary or secondary school.
How to apply for the Recovery Loan Scheme
To apply, you will need to find a lender from the British Business Bank website which you can see here.