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Published 22 November 2022

How to Apply for the Government Recovery Loan Scheme

The Recovery Loan Scheme aims to help businesses invest in growth. Originally introduced due to the Covid-19 pandemic, it has since been extended until 30 June 2024. Read on to find out more about the scheme, whether you’re eligible and how to apply.

The Recovery Loan Scheme (RLS) was announced by the then 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.

The scheme was once again extended on 1 August 2022, with a new deadline of 30 June 2024 alongside the removal of the Covid-19 impact test.

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

What is the Recovery Loan Scheme?

While the Recovery Loan Scheme was originally designed to help businesses recover and grow after disruption caused by Covid-19, from 1 August 2022 the focus on the impact of the pandemic was removed.

Under the rules implemented on 1 August 2022, eligible organisations will be able to apply for a maximum of £2 million per business group. That cap is reduced to £1 million for businesses operating within the Northern Ireland Protocol.

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 can a Recovery Loan be used for?

You can use a Recovery Loan for any legitimate business purpose, including growing and investing in your business. This could include, but is far from limited to:

  • managing cash flow problems
  • hiring new staff
  • promoting your business
  • launching a new product
  • meeting a one-off cost
  • covering seasonal trading demands
  • buying equipment

» MORE: How to grow your business

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

Am I eligible for a Recovery Loan?

Under the changes brought in on 1 August 2022, your business will not need to prove it was negatively affected by Covid-19 to qualify for a Recovery Loan, unless your business is a charity or further education college.

You will likely be eligible for a Recovery Loan if your business:

  • has an annual turnover that does not exceed £45 million
  • is currently trading in the UK
  • generates more than 50% of income from its trading activity in the UK (unless you are a charity or further education establishment)
  • has a viable business proposition
  • is not a business in difficulty
  • can prove it will not exceed the maximum amount of subsidy it is allowed to receive by accepting a Recovery Loan

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

What types of businesses are eligible for a Recovery Loan?

As long as you meet the criteria above, then the Recovery Loan Scheme is open to most business types. This covers:

  • sole traders
  • corporations
  • limited partnerships
  • limited liability partnerships
  • co-operatives and community benefit societies
  • any other legal entity carrying out business activity in the UK

If you are a charity or further education establishment that does not generate more than 50% of its turnover from trading activity in the UK, then you have until 31 December 2022 to apply for a Recovery Loan, as long as your organisation has been affected by Covid-19.

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.

Can I get a Recovery Loan with bad credit?

While you can get a Recovery Loan if your business has a bad credit rating, you will likely have fewer options available to you when it comes to choosing a lender.

Similarly, the interest rate you are offered may be higher than if you had a better credit score. However, the annual effective rate of interest, including fees, on a Recovery Loan cannot exceed 14.99%.

How do I apply for a Recovery Loan?

The Recovery Loan Scheme is open until 30 June 2024 . 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 up front and you’ll pay the interest yourself from the start.

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

While you are not required to give a personal guarantee to get a Recovery Loan, under the rules introduced on 1 August 2022, lenders can take personal guarantees ‘in line with their normal commercial lending practices’.

However, Principal Private Residences remain off limits, and cannot be taken as a security when applying for a Recovery Loan.

When does the government’s Recovery Loan Scheme close?

The Recovery Loan Scheme has been extended to 30 June 2024. The government may review this nearer the time.

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

If you are not eligible for a Recovery Loan, then hereare some good places to look for more support:

Business grants

If you cannot secure a Recovery Loan, then you could apply for a small business grant.

There are grants available across the UK, as well as dedicated schemes in England, Scotland, Wales and Northern Ireland.

You may also be able to find funding for specific groups, such as business grants for women.

Traditional business loans

If you do not meet the criteria for a Recovery Loan, then you may instead consider applying for a traditional business loan.

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 cash flow and where to get help in your region.

Image source: Getty Images

About the Authors

Suzanne Worthington

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…

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Connor Campbell

Connor is a lead 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…

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