Recovery Loan Scheme
By David Marshall
Government backed Coronavirus Loan Schemes, which end on the 31st March, have without doubt been incredibly useful, but some businesses fell foul of the criteria and had their applications declined. The schemes were introduced as a short-term measure in March 2020 and needed to evolve in order to remain fit for purpose.
The new Recovery Loan can, in principle, be used more widely and is potentially more flexible. However, much will depend on how the accredited lenders choose to operate the scheme within their own parameters and no doubt the devil will be in the detail.
The Recovery Loan Scheme will launch on the 6th of April, with the funding to be provided by High Street Banks and Alternative Finance Lenders.
The new scheme offers loans from £25,001 to £10m and will operate until 31st December 2021. The government will provide the participating lenders with an 80% guarantee.
This support is available to businesses: –
- trading in the UK
- which are viable or would be viable were it not for the pandemic
- have been impacted by the coronavirus pandemic
- which are not in collective insolvency proceedings
Recovery Loans: –
- term loans and asset finance repaid over six years and overdrafts and invoice finance subject to three-year agreements.
- no personal guarantees will be taken on facilities up to £250,000 and, as before, a borrower’s principal private residence cannot be taken as security.
- businesses will be required to meet the costs of interest payments and any fees associated with the facility.
Businesses that have received support under the existing Covid-19 guaranteed loan schemes will still be eligible to access finance under this new scheme if they meet all other eligibility criteria. It is not yet clear if existing Covid-19 guaranteed loans will have to be repaid when a Recovery Loan is drawn, (at the moment any BBL must be repaid if a CBILS facility is agreed).
We look forward to supporting our clients with the new Recovery Loans, but in the meantime, we continue to secure funding under the existing Coronavirus Loan Schemes until the 31st March.