Recovery Loan Scheme introduced

Published by John Walsham on 3 March 2021

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Access our updated Recovery Loan Scheme article and FAQ here.

With the Bounce Back, CBIL and CLBIL loan schemes due to finish at the end of March businesses and lenders alike will welcome the new government-backed lending scheme announced in today’s Budget. The current loan schemes have provided £72.9bn of loans to 1.6m businesses and the new Recovery Loan Scheme which commences on the 6 April provides a further opportunity for businesses of any size to access finance.

Eligibility remains similar to previous schemes in that the business should be trading in the UK and viable prior to COVID. A business that has already received support from the existing loan schemes is still eligible for further support under this new scheme.

Unlike CBILS, which was capped at £5m, this scheme can be used to access loan and overdraft finance of £25,001 up to £10m per business. It can also be used to access invoice and asset finance of £1,000 to £10m. Finance terms of up to 6 years will be available for loan and asset finance and up to 3 years for overdraft and invoice finance facilities.

The finance can be for any legitimate business purpose, and possibly could be combined with the newly announced ‘Super-deduction’ to help fund growth.

Similar to other COVID-19 related loan schemes the government will guarantee 80% of the amount borrowed to ensure the continued confidence of lenders to support businesses. No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security. What is not yet clear is the interest rate to be charged and/or whether an arrangement fee will be payable.

This scheme is currently scheduled to close on 31 December, and will be provided by a panel of accredited lenders: this list is yet to be announced but is anticipated to comprise those providing the current sources of government backed loans.

We will be regularly updating the Budget pages of our website. If you would like to discuss the implications, please don’t hesitate to get in touch. Alternatively, book your place on our Budget question time webinar on Friday 5 March 2021 to find out more.

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