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What is the Recovery Loan Scheme and can my business apply?

In his 2021 Budget on 3 March, Chancellor Rishi Sunak set out a £65bn three-point plan to: “Provide support for jobs and businesses as we emerge from the pandemic and forge a path to recovery”.

The Chancellor says he wants to continue to support hardest-hit businesses by extending the furlough scheme, as well as a series of new measures, including financial support for more self-employed people, new business grants, loans and VAT cuts. According to HM Treasury, the Government’s total fiscal pandemic support now amounts to more than £407bn.

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What is the Recovery Loan Scheme?

Also included in the latest raft of financial support measure is the Recovery Loan Scheme – “A new loan scheme to support access to finance for UK business as they grow and recover from the disruption of the COVID-19 pandemic” (source: GOV.UK).

The scheme launched on 6 April 2021 and will run until 31 December 2021 (subject to review). Loans are available via a network of accredited lenders which will be administered by the British Business Bank. According to GOV.UK: “26 lenders have already been accredited for day one of the scheme, with more to come shortly.”

The government will guarantee 80% of the finance to the lender, so that “they continue to have the confidence to lend to businesses”.

The new Recovery Loan Scheme replaces the existing government guaranteed schemes, which have supported £73bn of lending to date. These close at the end of March 2021.

What finance is available under the Recovery Loan Scheme?

Term loans and overdrafts will be available at a value of between £25,001 and £10m per business. There will also be invoice finance and asset finance worth between £1,000 and £10m per business. As explained on GOV.UK: “Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years”.

Offering reassurance to borrowers, according to the government: “No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security”.

Which businesses can apply for Recovery Loan Scheme funding?

You can apply if your business is trading in the UK, but you’ll need to prove that your business is:

  • “viable or would be viable [if] not for the pandemic”
  • “has been impacted by the pandemic”
  • “not in collective insolvency proceedings”.

According to GOV.UK: “Business that have received support under the existing COVID-19 guaranteed loan schemes will still be eligible to access finance under this scheme, if they meet all other eligibility criteria. Once you receive it, your business can use the finance for “any legitimate business purpose, including growth and investment”.

Businesses from any sector can apply, but the funding is not available to banks, building societies, insurers and reinsurers, public-sector bodies and state-funded primary and secondary schools.

How to apply for the Recovery Loan Scheme

The scheme launched on 6 April 2021 with 26 accredited lenders confirmed on the British Business Bank website – and “more to follow”. These include high street banks such as Barclays, HSBC, Natwest and Lloyds Bank.

According to the British Business Bank: “When looking to borrow, you should first approach your own finance provider – ideally via its website. You may also consider approaching other lenders if you’re unable to access the finance you need.”

Other sources of financial support

If your business does not qualify for funding under the Recovery Loan Scheme, it may qualify for other financial support from the government, which has announced a range of other support measures in the Budget for small businesses. According to the government, these include:

  • An extension of the Coronavirus Job Support Scheme to September 2021 across the UK. In other words, employers will be able to continue to furlough eligible staff.
  • £5bn for new Restart Grants – a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
  • An extension of the UK-wide Self Employment Income Support scheme to September 2021, with “600,000 more people who filed a tax return in 2019-20 now able to claim for the first time”.
  • An extension to the VAT reduction to 5% for hospitality, accommodation and attractions across the UK until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022.
  • Some 750,000 eligible businesses in the retail, hospitality and leisure sectors in England will benefit from business rates relief.
  • Unrelated to Covid-19, your business may be eligible for a startup business grant. 

Visit GOV.UK to see a comprehensive list of links to further information about government financial support available to businesses during coronavirus.