Today’s announcement by the Chancellor that a replacement facility (Recovery Loan Scheme) is to be made available will be a welcome development for businesses impacted by the COVID-19 pandemic. The scheme launches on 6 April and is open until 31 December, subject to review and loans will be available through a network of accredited lenders. The current Coronavirus Bounce Back Loans and Coronavirus Business Interruption Loans (CBILS) closed for new applications at the end of January.
The Recovery Loan Scheme aims to ensure that businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing COVID-19 loan schemes close. The Government’s aim is to provide businesses with support during their recovery following the disruption of the pandemic and the end of the transition period when cashflows are still likely to be depressed.
Once received, the finance can be used for any legitimate business purpose, including growth and investment.
As before, all businesses can apply except:
The Government will guarantee 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses. However, businesses will need to:
In short, they will need to show that they need the loan and that they will be able to afford to repay the loan!
The following types of finance will be available:
Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
No personal guarantees will be taken on facilities up to £250,000 and, as before, borrower’s principal private residence cannot be taken as security.
If you would like to discuss this new loan scheme, or have any other funding enquiries, please contact a member of the Banking and Finance team and we will be delighted to assist you.
For details of the other government backed loan schemes available and for general business-related Coronavirus updates why not sign up to receive email notifications from us as and when new guidance is received from the government or other regulatory bodies by visiting our Coronavirus (COVID-19) – Legal advice and guidance page.