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Recovery Loan Scheme open for applications

Written by: Emma Lunn
Businesses can now apply for new government-backed Covid-19 recovery loans through a £75bn scheme which aims to help firms get back on track after the pandemic.

The Recovery Loan Scheme offers loans up to £10m per business. The cash can be used for any legitimate business purpose including managing cashflow, funding for growth and investment.

To be eligible, the business must be carrying out trading activity in the UK and able to confirm that trading has been impacted by Covid-19.

The scheme was announced in the Budget on 3 March and is scheduled to run until 31 December 2021. The maximum interest firms will pay on borrowing under the scheme is 14.99%.

The government will back the loans up to 80% in a bid to help maintain lender confidence and avoid finance for businesses drying up. However, businesses will be 100% liable for the debt.

The British Business Bank will administer the scheme on behalf of the government. It also administered the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).

How much can you borrow?

Under the Recovery Loan scheme, firms can borrow up to £10m, up to a maximum of £30m per group. The scheme offers a wide range of products, including term loans, overdrafts, asset finance and invoice finance.

Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years.

Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Interest and fees are to be paid by the business from the outset.

Businesses that have taken out a loans under previous government schemes can access the scheme but amounts borrowed previously may limit the amount they can borrow under the Recovery Loan Scheme.

Personal guarantees won’t be required for borrowing of £250,000 or less.

How to apply for a Recovery Loan

The British Business Bank says business owners should approach their own finance provider initially – ideally via the lender’s website. Firms can also approach other lenders if they are unable to access the finance they need.

Lenders previously accredited to provide CBILS have been invited to apply for accreditation for the Recovery Loan Scheme.

Once accredited, lenders under the scheme will be listed on the British Business Bank website, with more lenders expected to sign up in the next few weeks.

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