Spring Budget 2021 - Recovery Loan Scheme Announced

Businesses hit by the pandemic will be able to access a new loan scheme to help them grow and recover from the disruption they’ve faced over the past 12 months.

The Recovery Loan Scheme (RLS), announced by the Chancellor in his Spring Budget, aims to ensure businesses of any size can access the finance they need to get back on track.

The scheme starts on 6 April and runs until 31 December. It will replace the Bounce Back Loan Scheme (BBLS) and Coronavirus Busines Interruption Loan Scheme (CBILS), which close on 31 March 2021.

The RLS operates in a similar way to the previous schemes, with the government providing lenders with an 80% guarantee for facilities ranging from £1,000 - £10m, up to a maximum of six years.

• Term loans and overdrafts will be available between £25,001 and £10m per business.
• Invoice finance and asset finance will be available between £1,000 and £10m per business.
• 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.

The eligibility criteria remains that the business must have been affected by the pandemic and demonstrate viability pre-pandemic as well as not being in collective insolvency proceedings. No personal guarantees will be required for lending under £250,000 and a borrower’s principal private residence cannot be taken as security.

The money can be used for any legitimate business purpose and those who’ve already received a CBILS or BBLS facility are able to utilise the new scheme, provided they meet all the criteria.

The RLS will be available through a network of accredited lenders, the names of which will be announced in due course.

Whilst on the face of things this looks like a continuation of the existing schemes, the National Association for Commercial Finance Brokers has reported that credit appetites are expected to tighten and there may be a cap on interest rates which could reduce the number of lenders looking to utilise the scheme. There is no mention of a capital and interest repayment holiday which previously provided businesses with much needed breathing space for the first 12 months of their BBLS or CBILS facilities.