How to apply for the Government Recovery Loan Scheme

The Recovery Loan Scheme is designed to help businesses recover and grow after the disruption caused by coronavirus. It was extended until 30 June 2022, with new eligibility requirements in place. Read on to find out more about the scheme, whether you’re eligible and how to apply.

Suzanne Worthington, Connor Campbell Last updated on 30 March 2022.
How to apply for the Government Recovery Loan Scheme

The Recovery Loan Scheme (RLS) was announced by Chancellor Rishi Sunak in his Budget speech in March 2021.

The original scheme ran from 6 April until 31 December 2021, but was extended from 1 January 2022 to 30 June 2022 due to the ongoing effects of the pandemic, and the rise of new Covid-19 variants. This extension came with changes to the scheme itself.

Read on to find out how the Recovery Loan Scheme works, whether your business is eligible, and the types of financing it covers.

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What is the Recovery Loan Scheme?

The Recovery Loan Scheme is designed to help businesses recover and grow after disruption caused by coronavirus.

Under the rules implemented on 1 January 2022, eligible organisations will be able to apply for a maximum of £2 million per business, with the maximum amount per group capped at £6 million.

You can use the funding for any legitimate business purpose, including growing and investing in your business.

The government guarantees 70% of Recovery Loans, but the borrower is fully liable for the debt.

What does ‘government guaranteed’ mean?

‘Guaranteed’ means that if the lender can’t collect the loan from the borrower, then the government will reimburse the lender.

Although lenders don’t have to offer Recovery Loans, the government guarantee makes the scheme more attractive to them. With 70% of your loan amount guaranteed by the government, lenders have more security that they’ll get their money back if you can’t repay your loan.

What types of finance are available with the Recovery Loan Scheme?

The Recovery Loan Scheme covers different types of business finance and what’s on offer from lenders will vary. Under the scheme, lenders can offer the funding as one of the following:

How much you can borrow depends on the individual situation of your business and the type of finance that you require.

For term loans and overdrafts, you can borrow from £25,001 to £2 million per business. For invoice finance and asset finance, you can borrow from £1,000 to £2 million.

» MORE: What are the different types of business loan?

Am I eligible for a Recovery Loan?

Since 1 January 2022, the eligibility requirements for the Recovery Loan Scheme have changed. You will likely be eligible if your business: :

  • has an annual turnover that does not exceed £45 million
  • is currently trading in the UK
  • is viable or would be viable were it not for the pandemic
  • has been negatively affected by the coronavirus pandemic

You won’t be eligible if your business is:

  • in ‘collective insolvency proceedings’
  • a bank, insurer or reinsurer (but insurance brokers are eligible)
  • a public-sector body
  • a state-funded primary or secondary school

Can I apply for a Recovery Loan if I’ve received other government loans?

Yes. If you’ve already had or are getting a loan from one of the other coronavirus guaranteed loan schemes, you can apply for a Recovery Loan. Of course, you'll also need to meet all the other eligibility criteria of the RLS.

How do I apply for a Recovery Loan?

The Recovery Loan Scheme is open until 30 June 2022 . To access the scheme, you will need to choose a lender and apply directly with them.

The list of accredited lenders and more information about the Recovery Loan Scheme is available on the British Business Bank’s website.

Is there a credit check to get a Recovery Loan?

All applicants for government Recovery Loans will be credit-checked by lenders. Lenders also have to carry out fraud checks.

When do I have to start repaying a Recovery Loan?

When you need to start your Recovery Loan payments will depend on your lender, while how long you get to repay the loan depends on the type of finance you take out. For term loans and asset finance, you’ll have up to six years to repay, while for overdrafts and invoice finance you’ll have up to three years to repay.

What are the interest rates and fees for Recovery Loans?

The interest rates and fees for the Recovery Loan Scheme vary from lender to lender, meaning you should carefully compare providers before applying. However, the annual effective rate of interest, combined with fees and other charges, cannot exceed 14.99%.

With a Recovery Loan, you’ll have to pay any fees upfront and you’ll pay the interest yourself from the start.

Do I have to give a personal guarantee to get a Recovery Loan?

It depends on how much you borrow. For Recovery Loans of up to £250,000, lenders are not allowed to take personal guarantees.

This means no matter what amount you borrow, lenders can’t take your home (‘principal private residence’) as security.

When does the government’s Recovery Loan Scheme close?

The Recovery Loan Scheme is scheduled to close on 30 June 2022. The government may review this nearer the time.

» COMPARE: Business Loans

What other help, grants or loans can I apply for?

You might be contacted about some coronavirus support automatically, such as the coronavirus grants from your local council. But for other help, you’ll need to apply or claim. Here are some good places to look for more support:

  • Support from other organisations
    Gov.uk lists support available for businesses from other organisations and charities.
  • Free advice for businesses
    You can call the government’s Business Support Helpline for free advice. Whether your business is based in England, Scotland, Wales or Northern Ireland, there’s a dedicated government helpline for your nation.
  • Free advice if you’re in debt
    If your business is in debt or you’re worried you might soon be, the British Business Bank has lots of information about how to manage your debts, how to improve your cashflow and where to get help in your region.

Image Source: Getty Images

About the authors:

Sooze is a specialist financial services writer, working ‘on the inside’ to help businesses communicate clearly for over 10 years. Her work has been awarded Fairer Finance’s Clear & Simple Mark. Read more

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

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