I am going to assume you want to know about the recovery loan scheme interest rate.
What is the recovery loan scheme?
The recovery loan scheme is a new incentive by the government to get businesses back on track after a tough year. We’ve had very good funding options like the Bounce Back Loans (BBL), and the Coronavirus Business Interruption Loan Scheme (CIBLS).
Those loans have been very useful for business owners to protect themselves to get the funding they need to keep their business running in these uncertain times.
Now, the BBL and CIBLS will come to an end on the 31st of March 2021.
Recovery Loan Scheme Details
Check out my details post on the recovery loan scheme here.
The Recovery Loan Scheme is set to take over with loans from £25,000 up to £10 million. The scheme will run from early April until December 31st 2021 at which point they will evaluate if it needs to continue.
The new scheme isn’t the same as the previous bounce back loan scheme which guaranteed 100% to the bank should you not pay.
This new scheme will guarantee up to 80% of the loan by the government. This will give banks confidence to lend which is very important.
If you were to borrow £1000, and for some reason you couldn’t pay that back the bank would get paid £800 from the government. They would lose £200 in that scenario but its a lot less risky for them than covering the full 100% themselves.
Recovery Loan Scheme Interest Rate
The previous loan schemes like the BBL and CIBLS had a very low interest rate at 2.5%. The interest rate with the recovery loan scheme is higher due to the fact that that government is now only guaranteeing 80% of the loan.
You’re going to be looking at the headline interest rate of 6%.
That’s the headline rate which Rishi Sunak was talking about, but they are capped at 15%. They’re not able to charge you more than 15%, which is still really, really good.
When Can I Apply For The Recovery Loan Scheme?
The recovery loan scheme loans initially launches on the 6th of April, there’s going to be some difficulty to get them on launch because there’s going to be bugs to work out.
When Bounce Back Loans launched it was a bit of a mess the first few weeks. So do expect something similar as they get to grips with the new scheme.
Don’t panic, if you don’t get one straight away.
Banks will be overwhelmed with applications because 100’s of thousands of businesses need these loans to get them back on track.
The key here is to get prepared.
To get a loan you will need things like your accounts and any filing with companies house to be up to date. Why wait until 6th April you can get that started today. Speak to your accountant and find out what you need to file to ensure you are up to date.
How About The BBL and CBILS Loan Schemes?
With the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme ending on March 31 this will be the replacement.
The Bounce Back scheme was very generous with a 100% guarantee it was pretty easy to apply. The CBILS was a bit tougher and is more like the recovery loan scheme.
You can get a Recovery Loan Scheme loan if you already had a loan from one of the previous schemes which is good news.
While not as generous as a bounce back loan the recovery loan scheme is still a great thing to support UK business. Having the money sitting in your bank will protect your business when you need it during the next few years.
Its better to have the money and not need it, than need the money and not have access to it.
Ive got a more in-depth article on everything you need to know about the recovery loan scheme here.
