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Recovery Loan Scheme Funding is Coming to an End

25 January 2022

Government-backed funding for the recovery loan scheme is coming to an end in June of this year – so if you are yet to take advantage, now is the time to do so.

In the Autumn budget of 2021, the chancellor of the exchequer announced that the Recovery Loan Scheme (RLS), previously set to end on January the 1st, 2022, would be extended for six months. This scheme was implemented in an effort to provide businesses with some relief from problems associated with the Covid-19 pandemic, and it provides lenders with government backing for loans taken out.

What is the scheme?

Under the original iteration of the RLS, businesses could take loans from accredited lenders, listed on the British Business Bank’s website – with amounts up to £10 million available, at the individual discretion of the lender. Any business trading in the United Kingdom could apply, as long as they could demonstrate that there had been a negative impact caused by the pandemic and that the business would be viable in a pandemic-free environment. The loan amount was then backed up by the government for up to 80%.

In the newest version of the scheme, there have been changes. Now, only small and medium-sized organisations (total group turnover cannot exceed £45 million) can apply for a business loan backed by the government, the maximum loan amount has been reduced to £2 million, and the backing has been reduced to 70%.

What are the terms?

The terms of loans taken out under the RLS are at the discretion of the lending company – however, there are some caps applied. The annual effective rate of interest, upfront and other fees cannot be more than 14.99%, for asset finance and loans, the term length cannot exceed six years, and for overdraft and invoice financing, the term cannot exceed three years. While the government is backing the loans, the business taking out the finance needs to be able to meet the costs of interest, capital repayments and any fees associated with the loan at the outset of the agreement – meaning that you need to be able to start paying the loan back from month one.

What does this mean for business?

If you are a small or medium-sized business trading in the United Kingdom and your operations have been negatively impacted by the ongoing coronavirus problems, then you have a limited time to take advantage of the preferential loan terms available from lenders backed by the government. The money from the loan can be used for any business purpose, including for investment, growth or cash flow management.

If you are planning to grow your business over the next year or two, and you know that you will need external financial support to do so, now is the time to act – lenders backed by the government are more inclined to provide you with the amount you need at preferential terms. Likewise, if you need money to invest in new areas, research and development, or even expansion, then you have less than six months to leverage the recovery loan scheme to your advantage.

Already taken Coronavirus-related support?

If you have already taken advantage of a government scheme implemented to counteract the effects of the COVID pandemic on business, such as the Bounce Back Loan, or Business Interruption Loan, you can still take advantage of the Recovery Loan Scheme. You will be assessed for eligibility and must meet certain lending criteria, and in some cases, you may only be able to borrow a lower amount due to participation in other schemes – but you can still expect to receive a loan on favourable terms.

How can you apply for government-backed funding?

At Union Business Finance, we partner with a number of British Business Bank accredited lenders, meaning that we can help you to find the right lender to meet your needs. You can get your access to government recovery loan scheme funding started with a phone call – no appointment necessary – and we will help you to navigate the complicated application process as well as identify the lender that best meets your specific business needs. Time is ticking – get in touch today before the scheme comes to an end.

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