4.5.2021 | Tax

How to make the most of the Recovery Loan Scheme

Nick Marshall, director at Beatons Group, explores what financial help is available for businesses in the government’s new Recovery Loan Scheme.

As the vaccine rollout maintains its quick pace and cases of COVID-19 continue to fall, businesses across the UK are now looking to the future.

From haulage to hotels, most companies have found the pandemic and subsequent lockdowns a challenging time, with many having to put staff on furlough or cut down on their spending costs to help them weather the storm.

What is it?
The Recovery Loan Scheme has been set up to give businesses access to loans to help them recover after the pandemic.

This new scheme should not be confused with the government’s earlier bounce back scheme – as the size of the loan is much higher, as are the interest rates.

It also requires extensive checks for a borrower’s financial viability and demands for personal guarantees.

However, for larger companies who have been hit hard by lockdown, this scheme may help them hit the ground running and help them plan ahead.

Who can apply?
The government’s loan scheme is on offer for any business that trades in the UK.

To qualify, a business must show they would have been viable had it not been for COVID-19 and that the pandemic has adversely impacted them.

Businesses must also show they are not in collective insolvency proceedings unless within the scope of the Northern Ireland protocol where different eligibility rules apply.

Businesses who received a loan through a previous loan scheme are still eligible to access loans under the new scheme.

Firms from any sector can apply – apart from banks, building societies, insurers, public sector bodies and state-funded primary schools.

How much can a business borrow?
Loans and overdrafts from £25,001 to £10million are available per business, with invoice finance and asset finance of between £1,000 and £10million also available per company.

However, personal guarantees will not be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

Unlike the previous bounce back scheme, the take-up of this scheme has so far been sluggish, with the Financial Times reporting it could be down to the more stringent checks and higher interest charges than other pandemic loans.

However, for a business looking to rehire staff or need help with cash flow, this scheme still offers a good way to secure funding for the future.
For more information about Beatons Group, visit beatons.co.uk