The Recovery Loan Scheme: The Next Generation

Earlier this month, the British Business Bank outlined the key terms of a new iteration of the Recovery Loan Scheme intended to help smaller UK businesses in their battle against rising costs in the current economic climate.

Previously…

As we explained in our earlier articles (see here and here), the Recovery Loan Scheme was originally launched by the UK government in April 2021 with the aim of supporting UK businesses during the Covid-19 pandemic by enabling access to the finance they needed to continue trading. Initially set to close at the end of 2021, the Recovery Loan Scheme was subsequently extended for an additional period of six months until June 2022 (albeit with a lower maximum loan amount and a reduced government guarantee).

The trailer

In a press release on 20 July 2022, the Department for Business, Energy and Industrial Strategy (“BEIS”) announced that the Recovery Loan Scheme, would be extended for a further two years until the end of June 2024 and will be open for applications from August 2022 (the “Extended Scheme”).

The new series

Key features:

Extended Scheme ends	30 June 2024
Available to	Businesses: (a) with a turnover of up to £45 million; (b) carrying on trading activity in the UK; and (c) which are not “businesses in difficulty”
Loan amount	Asset and invoice finance: Between £1,000 and £2 million Term loans and overdrafts: Between £25,001 and £2 million
Term lengths	Term loans and asset finance facilities: Between three months and six years Overdrafts and invoice finance: Between three months and three years
Government-backed guarantee	70% against outstanding balance of the loan following normal recovery processes
Personal guarantee	Lenders may take personal guarantees irrespective of the size of the loan
Pricing	Annual effective rate of interest and upfront and other fees are capped at 14.99%

Aside from the extended end date, a further significant change is that, unlike the original Recovery Loan Scheme, there is now no requirement for a business to confirm that it has been adversely affected by Covid-19. In a similar vein, any business which has previously taken out one of the other government-backed loan schemes during the pandemic (the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan or the original Recovery Loan Scheme) will still be able to take advantage of the Extended Scheme.

The cast

As with the original Recovery Loan Scheme, the Extended Scheme will be administered, on behalf of BEIS, by the British Business Bank.

Lenders which are participating in the Extended Scheme will be listed on the British Business Bank’s website once applications are opened. This date is yet to be announced.

Disclaimer

This note reflects the law as at 17 August 2022. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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