Budget 2021: Entrepreneurs & Companies - Recovery Loan Scheme

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Budget 2021: Entrepreneurs & Companies - Recovery Loan Scheme

Budget 2021: Entrepreneurs & Companies - Recovery Loan Scheme

In the spring Budget, Chancellor Rishi Sunak announced the Recovery Loan Scheme, designed to assist businesses in their recovery from the global pandemic. 

Extending financial support during the pandemic

Set to launch on 6 April and run until 31 December 2021 subject to review, the Scheme will replace existing finance support initiatives which have been in place over the last year – the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS). These schemes have already paid out a combined total of more than £70bn to British businesses.

What can businesses apply for?

Under this new Scheme, business will be able to apply for affordable finance to support their post-pandemic development, which is likely to be on more favourable terms than a standard finance agreement. Depending on the type of facility, once received, the finance can be used for any legitimate business purpose, including investment and growth.

Invoice finance (for terms of up to three years) and asset finance (for terms of up to six years) will be made available between £1,000 and £10 million per business. Term loans (for up to six years) and overdrafts (for terms of up to three years) will be available between £25,001 and £10 million per business.  

Which businesses are eligible to apply?

Businesses which are trading in the UK, have been affected by the coronavirus pandemic and are viable (or would be viable were it not for the pandemic) are able to apply for loans under the Scheme. Businesses must also not be involved in collective insolvency proceedings – the government advises that further details will follow on this point in due course. The viability criteria is similar to CBILS and in contrast to BBLs, where viability was not assessed. Demonstrating viability may be more difficult at this point, given that many businesses are carrying a build-up of debts from March 2020. However, the government will guarantee 80% of finance to lenders (already including several major banks such as Lloyds, Barclays and Virgin Money) to maintain confidence in business lending in a post-pandemic world.

Further, there is no turnover limit governing who can apply for finance, meaning businesses of all shapes and sizes can benefit. Loans under the Scheme can also be granted even if a business has already successfully applied for a CBILS, CLBILS or BBLS facility. Only banks, building societies, insurers, public sector bodies and state-funded primary and secondary schools are not eligible to apply.

While the Scheme is a welcome continuation of government financial support for businesses, many are crying out for the comfort of longer-term funding initiatives. The Scheme comes in addition to the announcement of a £5 billion restart programme which will offer grants to assist retail, hospitality and care businesses as they start to reopen from April.

Get in touch

If you’d like to find out more about this update, please get in touch with Sean Halliwell.

This article was prepared by Tom Revitt.

Our corporate team are on hand to explain the new tax proposals and provide up-to date advice. If you would like to find out more about these, as well as the spring Budget’s other key points, please do not hesitate to contact us

All information in this update is accurate at the time of writing. It is meant for general information only and is not legal advice.