Rishi Sunak has just announced what will replace the Bounce Back Loan and CBILS loans scheme.
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.
(Watch this video for everything you need to know about The Recovery Loan Scheme)
The Government will guarantee 80% of these loans down from 100% on the Bounce Back Loan Scheme.
The loans are on top of the new Restart Scheme which will offer grants of up to £18,000.
Rishi said in the budget “Even with the new Restart Grants, some businesses will also need loans to see them through,”
I couldn’t agree more and hope these loans are as easy to get as the previous Bounce Back Loan Scheme.
Length Of Recovery Loan Scheme
These loans are for 6 years giving you plenty of time to get your business back on track. For extensions to overdrafts and invoice financing the time is 3 years. Both these timeframes are pretty solid and might be extended at some point similar to Bounce Back Loans.
Do I have to personally guarantee my Recovery Loan Scheme borrowing.
For borrowing under £250,000 you do not have to put a personal guarantee. And like the Bounce Back Loan Scheme they cannot take your private residence as security. Normally with a business loan you would be expected to personally guarantee the loan putting all the risk on you should the business fail.
To ensure banks continue to lend the government is guaranteeing the first 80% of the loan. This is an essential step to ensure banks don’t put a freeze on lending and make sure the money gets to those businesses in need.
When does the Recovery Loan Scheme Open and for how long.
The scheme opens 6th April 2021 and is set to run until 31st December 2021 (Although I expect it to get extended). The loans will be available through accredited lenders yet to be announced. I expect these lenders to be the same lenders that issued Bounce Back Loans and CBILS.
Full details on lenders and how to apply will be released in the coming weeks. However I will release videos on my Youtube Channel as soon as I have the information.
Who can apply for the Recovery Loan Scheme?
UK based businesses can apply under the following conditions.
- Be viable or would be viable were it not for the pandemic
- Have been impacted by the coronavirus pandemic (Lets face it those most businesses)
- Not be in insolvency proceedings
If you are a Bank, Building Society, Insurance Company, Public Sector Body or a School you cannot apply for one of these loans.
Whats interesting here is they have not stated you needed to be trading prior to March 2020 which was a condition of the Bounce Back Loans.
Fingers crossed that is the case as lots of good businesses could not get funded on the Bounce Back Loan Scheme due to that.
Ive had a Bounce Back Loan or CBILS can I apply for the Recovery Loan Scheme.
I was not expecting this at all, I thought this would be an extended option for those that had not already had a loan.
But as Rishi said “Even with the new Restart Grants, some businesses will also need loans to see them through,”.
Obviously you need to hit the above criteria to be approved for a loan. But I see this as very positive news, Bounce Back Loans and CBILS offered huge support when needed during 2020.
However business is still tough and we need to support businesses to get back on their feet.
What Is The Interest Rate Of The Recovery Loan Scheme?
Great question, they are slightly more expensive than the Bounce Back Loan Scheme which was 2.5%.
The Recovery Loan Scheme interest rates will be set at 6%, this makes the repayments very affordable and much better than a normal commercial loan.
What about the Bounce Back and CBILS loan schemes?
The Bounce Back Loan scheme and CBILS will finally come to an end on 31st March 2021.
The schemes introduced last year were a lifeline to many small businesses who without them would not have survived.
If you are reading this prior to 31st March I suggest you apply for a Bounce Back Loan. The terms are slightly better than the Recovery Loan Scheme and you get longer to pay off the loan.
I see the Recovery Loan Scheme as a blessing for many small business owners in the UK. Many of those through no fault of their own have struggled with the pandemic. They might have had a Bounce Back Loan already but still require that little bit of extra funding to get them back on track.
This will be the last round of funding and grants offered to small business owners in the UK. Now is the time to see your come out of this recession stronger than you went it.
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