New Recovery Loan Scheme

With the final application dates for the Coronavirus Business Interruption Loan and the Bounce Back Loan drawing closer (31st March 2021), eligible businesses will be able to apply for the new Recovery Loan Scheme from 6^th April 2021.

The new loan scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10m. The scheme will be open to all businesses in the UK, including those who have already received support under the existing CBILS and BBLS.

In addition to these loans, invoice and asset finance is also expected to be available between £1,000 and £10m.

The Recovery Loan Scheme will likely be available much like the CBILS loans were, but not as readily available as the bounce back loans, with a little more due diligence required by the bank. It may be used for “any legitimate business purpose, including growth and investment” though.

The scheme will be open until 31st December 2021 – though of course, subject to change.

However, the 80% guarantee is likely to still present the lack of willingness from banks we found when CBILS was first launched, meaning there may be fewer banks offering these.

As with CBILS, personal guarantees may be required on loans over £250,000. Todd Davison of Purbeck Personal Guarantee Insurance said:

“The new, Recovery Loan Scheme is welcome but comes with some very big catches, chief of which is a Personal Guarantee for loans over £250,000 which puts the business owners/directors’ personal assets, excluding their home, at risk if the business fails. Our concern is that only around 4 in 10 small business owners understand what a Personal Guarantee is so there needs to be much greater awareness of the risks and how to mitigate them.”

It’s about you can afford the repayments and are aware of the risks with taking personal guarantees. Personal guarantee insurance can help mitigate this risk so that if the business does fail, up to 80% of the loan will be settled by the insurance.

Speak to Todd Davison at Purbeck Insurance by calling 0208 004 7250 or emailing t.davison@purbeckinsruance.co.uk for more information on what personal guarantee insurance entails.

Below we outline the details of the scheme such as eligibility and what information you need to complete before you approach a lender.

Details of the scheme

Are you eligible for a recovery loan?

Business trading in UK
Proof of business ‘viability’ before the pandemic
Proof business has been impacted by coronavirus pandemic
Proof business is not in insolvency proceedings

What are the details of the recovery loan?

Finance terms are up to 6 years for term loans and asset finance
Finance terms up to 3 years for overdrafts and invoice finance
No turnover restriction
Interest and fees paid from the outset
Businesses who have taken out CBILS and BBLS can access the scheme

How much can your business borrow?

Term loans and overdrafts between £25,001 and £10m per business
Invoice finance and asset finance between £1,000 and £10m per business

What interest will you pay?

We expect this will be similar to current loan rates of c.2.5%

What information do you need to complete before you approach a lender?

Up to date annual accounts submitted to Companies House
Management Accounts for the period since accounting year end
6, 9 and 12-month cash flow demonstrating repaying delayed VAT, PAYE etc

Can you only apply for a recovery loan through your bank?

There are few announcements on this, but we hope that all the major banks will be offering this
As with CBILS loan scheme, we hope that Funding Circle will be offering these loans as an alternative to your current bank

Talk to us

As with any lending it should be approached with caution because it can increase the risks to your business as ultimately these will need to be paid back. Having a business plan or rough cashflow forecast will be helpful in making sure your businesses is taking on the correct commitment to borrowing.

Talk to us and we can assess your personal circumstances and help you come to the best decision and help you with everything you need to approach a lender.