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The Recovery Loan Scheme replaces former government lending arrangements that were set up to assist businesses during the Covid-19 pandemic, such as Bounce Back Loans.

The scheme, which launched on 6 April 2021, will be open for applications until 31 December 2021 and companies can apply for an amount between £25,000 and £10 million – subject to agreement with the lender as a term loan or overdraft. It also offers invoice or asset finance of between £1,000 and £10 million per business.

The length of the loan depends on the type of finance applied for and is from three months up to six years for term loans and asset finance facilities and for overdrafts and invoice finance facilities is from three months up to three years.

Costs vary according to the type of loan and lender, however, it is agreed that the annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.No personal guarantees are taken on facilities up to £250,000, and a borrower’s  principal private home cannot be taken as security. Borrowers should note that while the government guarantees 80% of the loan amount, this is only for the lender and the borrower will always be liable for 100% of the debt.

Loans are available from a network of accredited lenders, which are listed on the British Business Bank’s website.

The British Business Bank is UK-government owned but independently managed and focused on making finance markets work better for smaller businesses. It works with over 130 partners, including banks, leasing companies and venture capital funds.

Who is the Government Recovery Loan Scheme Open to?

The scheme is open to all UK businesses, no matter what their turnover is. It can also be accessed by those who have taken out loans under the previous government schemes, such as: who have taken out other loans under other government schemes, notably the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS).

However, the amount borrowed under one of these schemes can in some circumstances affect the amount that can be borrowed under the Recovery Loan Scheme.

Eligibility Criteria

Borrowers are not guaranteed their loan application will be accepted and lenders retain the right to reject firms which are not seen as having a viable business proposition. They will need to meet the eligibility criteria, which are as follows:

  •  The business must be trading in the UK
  •  The business would be viable were it not for the pandemic
  •  The business has been adversely impacted by the pandemic
  • The business is not in collective insolvency proceedings 

Who is not Eligible for the Recovery Loan Scheme?

Those who cannot apply for the scheme are bank, building societies, reinsurers and insurers – however, insurance brokers are eligible. Further, public sector bodies, state-funded primary and secondary schools are also barred.

How to Apply

Those wanting to apply for the scheme, should visit the British Business Bank website and select from the list of accredited lenders.  Applicants should also be prepared to undertake standard credit, fraud, anti-money laundering and know your customer checks. However, applicants may be reassured that lenders will  not be overly focused on a firm’s short to medium performance, because so many have been negatively impacted by the pandemic.

Lenders will require evidence that a business will be able to repay the loan and is likely to request documentation to make checks, such as recent and historic management accounts, the business plan and details of assets. Decision making, on whether a loan will be granted, is fully delegated to the accredited lenders.