New Recovery Loan Scheme launched on 6 April

UPDATE: in 27 October 2021 Budget, the Recovery Loan scheme was extended to 30 June 2022.

A new Recovery Loan Scheme announced in the 3 March Budget launches on 6 April until 31 December, subject to review.

Under the scheme banks will offer risk-based interest rates rather than the fixed 2.5% rate under the Bounce Back Loan Scheme (BBLS). However, it is understood lenders will be required to offer lower-than-normal rates to pass on the benefit of government guarantees. Interest rates will be capped at 15% with debt of up to £10m available for businesses of all sizes.

The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing COVID-19 loan schemes close, providing support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.

Once received, the finance can be used for any legitimate business purpose, including growth and investment.

The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

Loans will be available through a network of accredited lenders, whose names will be made public in due course.

What type of finance is available

• Term loans and overdrafts will be available between £25,001 and £10 million per business.
• Invoice finance and asset finance will be available between £1,000 and £10 million per business.

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.

No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

Eligibility

A business will be able to apply for a loan if it is trading in the UK

The business will need to show that it:

• is viable or would be viable were it not for the pandemic
• has been impacted by the coronavirus pandemic
• is not in collective insolvency proceedings - further details will be provided in due course

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.

Who cannot apply

Businesses from any sector will be eligible to apply, except:

• banks, building societies, insurers and reinsurers (but not insurance brokers)
• public-sector bodies
• state-funded primary and secondary schools

Further details

Further details have been published by the British Business Bank.

How to apply

The scheme will launch on 6 April 2021.

Further details on how to apply and details of accredited lenders will be released in due course.

Government measures in place to support businesses and workers during the coronavirus pandemic can be found in our Business after COVID-19: Transition Knowledge Hub.