Ensuring plenty of support for small businesses has been a government priority throughout the pandemic. This week, they’ve added the Recovery Loan Scheme into the mix – a new borrowing option for businesses that need help in recovering from the effects of Covid-19.
The Recovery Loan Scheme replaces the government’s existing Covid-19 business financing scheme, and allows eligible businesses to borrow up to £10 million from accredited lenders. The scheme is specifically designed to support businesses who have suffered losses or setbacks as a result of the coronavirus pandemic.
The idea of the scheme is that lenders will be able to offer better terms on their loans, as the money borrowed will be backed by a government guarantee.
In order to qualify for the scheme, you’ll need to be able to prove that your business has been negatively impacted by Covid-19. You’ll also need to show your lender that you have a viable business proposition, satisfy their credit checks, and be currently trading in the UK. Approving a loan will be at the lender’s discretion.
Public-sector bodies won’t be eligible for support, and neither will state-funded schools or banks/building societies/insurers.
You will be liable for 100% of the debt, so you’ll need to be able to show evidence of your ability to make repayments.
The scheme is available to people who have borrowed from previous government financing schemes such as the Bounce Back Loan Scheme. However, the amount that you’ve borrowed previously may affect how much you qualify for.
There are four different types of finance available under the Recovery Loan Scheme:
- Term loans
- Asset finance
- Invoice finance facilities
For asset finance and invoice finance facilities, there is a minimum amount to borrow of £1,000. For overdrafts and term loans, this rises to £25,000.
These financing options are available from a range of different lenders, including alternative business finance lenders as well as high street banks. Any lender will need to be accredited by the British Business Bank.
How to apply
If you want to apply for the scheme, you’ll need to find a suitable lender yourself by searching the British Business Bank website. There are several options already available, and as it’s still early days we expect that more will be announced over the coming weeks. Different lenders may offer different financing options, so you’ll need to take a look at the range of options available and consider what’s best for your business.
Once you’ve found a lender that you like the look of, you should be able to start an application through their website. They will provide further details, such as how much they’re able to lend you and what paperwork you need to provide.
Is the loan scheme right for me?
This is designed to make it easier to access financing and to ensure that businesses are given good terms, however some banks may be able to offer alternative options with better rates. Definitely weigh up the different options, and choose the one that gives you the best benefits and repayment rates. You should also be sure of your plan to make repayments before taking out any kind of debt.