The COVID-19 Recovery Loan Scheme (RLS) officially launched on 6th April 2021, aimed at supporting small businesses as they recover from the disruption caused by the various coronavirus restrictions.
The RLS is the latest addition to the range of financial help and support offered by the UK government to help sole traders and limited companies through the pandemic, following on from the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme, which are both now closed to new applications. Businesses may also still be able to access support through the Self-Employment Income Support Scheme (SEISS) and the Coronavirus Job Retention Scheme (CJRS).
So, what exactly is the Recovery Loan Scheme, and who can apply for a loan?
What is the COVID-19 Recovery Loan Scheme?
The COVID-19 Recovery Loan Scheme provides access to finance, backed by the government, to any UK business impacted by the COVID-19 pandemic. The loans are intended to help businesses grow and recover from the disruption caused by the pandemic. The scheme was initially announced in the March 2021 Budget and launched on 6th April.
Loans are available through a network of accredited commercial lenders, and administered by the British Business Bank. As at April 2021, 26 lenders were accredited ahead of the scheme’s launch, with more lenders likely to be added. The government will provide an 80% guarantee for all loans taken out through the scheme, and the interest rate has been capped at 14.99% (although it’s expected that the vast majority of businesses will be able to access loans at much lower interest rates). The actual amount offered and the terms are determined by participating lenders.
How much can you get?
Under the COVID-19 Recovery Loan Scheme, you might be able to secure:
- A fixed term loan or overdraft of between £25,000 and £10 million per business
- Invoice or asset financing of between £1,000 and £10 million per business.
The Recovery Loan Scheme can be claimed in conjunction with previous COVID support schemes, such as the Coronavirus Business Interruption Loan Scheme (CBILS) or the Bounce Back Loan Scheme. Claims can be submitted up until 31st December 2021.
Please remember: although the loan comes with a government-backed guarantee, you will be completely liable for the debt and its repayments.
How long is the loan for?
The maximum length of the loan facility depends on the type of finance you apply for and will be:
- up to three years for overdrafts and invoice finance facilities
- up to six years for loans and asset finance facilities.
Who can apply for a loan through the COVID-19 Recovery Loan Scheme?
A range of businesses can make a claim: hairdressers, cafés, restaurants, gyms, and pubs are all eligible, as are any businesses that meet the following criteria:
- The business is based in the UK
- The business requires a loan to enable trade during short-to-medium term difficulty
- The business can afford to repay the loan within six years.
You also need to be able to show that your business:
- Would be viable were it not for the pandemic
- Has been adversely affected 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).
Businesses that received support under the earlier COVID-19 guaranteed loan schemes are still eligible to access finance under this scheme if they meet all other eligibility criteria. In a statement, the British Business Bank explained that: “You can use the finance for any legitimate business purpose – including managing cashflow, investment and growth. However, you must be able to afford to take out additional debt finance for these purposes.”
How to apply for a loan under the COVID-19 Recovery Loan Scheme
The Recovery Loan Scheme is not available via Gov.uk. As we’ve already discussed, the British Business Bank and its accredited lenders are the gatekeepers and providers of this scheme, which means you’ll need to go to one of those lenders directly if you’d like to apply. You may find it easier to access a loan through your own business bank, but you can also approach any lender, regardless of whether your own bank is participating in the scheme.
The full list of lenders, and how to apply is available on the British Business Bank website, but some of the biggest names include:
For more information on the support available to small businesses during the coronavirus pandemic, visit our comprehensive COVID-19 Hub. There, you’ll find all the latest news and guidance, as well as all of our jargon-free articles and guides.