The recovery loan scheme was launched on the 6th of April 2021 to provide additional support for businesses that have been impacted by the pandemic. The recovery loan scheme is specifically intended to benefit SMEs and help them to achieve growth. It should ideally be used to facilitate new equipment, new staff members and manage working capital.
The recovery loan scheme offers support for UK SMEs of any size to access loans of up to £10 million. The government guarantees 80% of the finance to the lender, so that they are more willing to lend in this current climate. Loans are available through a network of accredited lenders, listed on the British Business Bank’s website, including Barclays, HSBC, Skipton, Aldemore, Paragon, Llyods and more.
There has been an initial holdback of recovery loan scheme applications in comparison to the Coronavirus Business Interruption Loan Scheme (CBILS). Applications were in their ‘low thousands’ and according to the Financial Times, one of the UK’s largest banks received less than 500 applications in the first few days, however, the same bank approved 2,000 applications in the first few days of CBILS. This may be due to the fact, that the application rules for the Recovery Loan Scheme are much more stringent. With CBILS or the Bounce Back Loan Scheme (BBLS), the government paid the first 12 months and the upfront fee on your behalf. This is however not the case with the recovery loan scheme. Furthermore, extensive checks are carried out with the recovery loan scheme on the borrowers’ financial history, alongside demands for personal guarantees.
However, there are still highly beneficial perks to the recovery loan scheme for SMEs. You can borrow up to £10 million, and there is no minimum turnover required, unlike CBILS which had a minimum of 200k. There has been a call for the government to see if they can update the recovery loan scheme and streamline the application process. They may also reduce the minimum loan threshold to £25,000. This should further encourage SMEs to continue to borrow from the scheme and help the economy get back on its feet.
We want to make the Recovery Loan Scheme as straightforward and accessible to as many SMEs as possible, so we have answered some FAQs.
Can I apply for a Recovery Loan if I’ve received other government loans?
Yes, even if you have already received a COVID recovery loan such as CBILS, you can still apply for the Recovery Loan Scheme.
How do I apply for a Recovery Loan?
Contact the team at Funding Bay, and speak with one of our experts who will be able to give you a consultation. Once you have provided the necessary documents, we will handle the entire application process for you, and put you in touch with the most suited lender. Find out more about the accredited lenders so far here.
What documents will I need when I apply for a Recovery Loan?
Because the recovery loan scheme is orientated around growth, lenders will need to know that you can afford to repay. You should send your, management accounts (records of your profit and loss, cash flow, forecasting), previous years’ accounts, details of other business loans or personal loans, mortgage or overdraft.
Get in contact with Funding Bay and find out more here.
