The government has replaced the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans with a new initiative to help businesses get back on their feet: the Recovery Loan Scheme.
We know what you might be thinking – another scheme? Another loan? Is this relevant to your business, and how does it work alongside the various loans already put in place by the government. Let’s dig into that.
The Recovery Loan Scheme is to help businesses of any size access loans and other kinds of finance so they can recover after the pandemic and transition period.
The Recovery Loan scheme offers loans of up to £10 million per business to replace the CBILS and Bounce Back loans.
If you already have a CBILS or Bounce Back Loan, you can still apply for a Recovery Loan, you’ll just need to prove that your business has been affected by the pandemic. You may find the amount you can borrow is affected by the amount you have already borrowed via the other government initiatives.
Loans will be made available through a network of lenders, accredited by the British Business Bank, and these lenders will be listed on the British Business Bank website.
This will include:
- term loans or overdrafts of between £25,001 and £10 million per business
- invoice or asset finance of between £1,000 and £10 million per business
No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.
The scheme is open until 31 December 2021, subject to review, and the time period for repaying the loan will depend on the type of finance you apply for, either:
- up to 3 years for overdrafts and invoice finance facilities
- up to 6 years for loans and asset finance facilities
Any business can apply, but you will need to show your business has been adversely impacted by the pandemic
You can apply for the Recovery Loan Scheme if your business is trading in the UK, with a few exceptions. Those are:
- banks, building societies, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- state-funded primary and secondary schools
If you are an eligible UK business, you’ll need to be able to show that your business:
- would be viable were it not for the pandemic
- has been adversely impacted by the pandemic
- is not in collective insolvency proceedings (unless your business is in scope of the Northern Ireland Protocol in which case different eligibility rules may apply)
If you’ve been struggling with cash flow issues due to the impact of the lockdowns, or you need to invest back into the business in order to grow due to the damaging effects of the pandemic – this loan might be for you.
However, though the government guarantees 80% of the finance to the lender, remember you will be 100% liable for the debt, and so you must be able to afford to take out the finance as the borrower.
If you’re starting to reopen your business and you need advice, we’re here to help
The prospect of reopening after the impact of last year can feel really intimidating. You might be unsure whether a loan would be a help or a hindrance later down the line, and so we encourage you to talk things through with an accountant and advisor you trust.
We’re always here to help you find the best route for your business situation, so you can feel confident in the decisions you’re making. We’re running a business too! We understand how lonely some of those big decisions can feel. If you want to have a chat with one of the Fresh Financials Team, it’s easy to get us here.