How to apply for a Government Recovery Loan

The Recovery Loan Scheme is designed to help businesses recover and grow after the disruption caused by coronavirus. It replaces the Bounce Back Loans Scheme and the Coronavirus Business Interruption Loans Scheme. Read on to find out more about the scheme, if you’re eligible and how to apply.

Suzanne Worthington Published on 19 April 2021.
How to apply for a Government Recovery Loan

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

The scheme is open from 6 April until 31 December 2021. It takes over from the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme which both ended on 31 March 2021.

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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.

Businesses of any size, in any sector, can apply for funding of up to £10 million from accredited lenders.

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

The government guarantees 80% 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 80% 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.

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 £10 million. For invoice finance and asset finance, you can borrow from £1,000 to £10 million.

Am I eligible for a Recovery Loan?

Businesses from any sector can apply and there’s no turnover limit.

You’re eligible for a Recovery Loan if your business:

  • 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 aren’t 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. And of course, you'll need to meet all the other eligibility criteria.

How do I apply for a Recovery Loan?

To apply for a Recovery Loan, you’ll 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.

What documents will I need when I apply for a Recovery Loan?

Lenders will need to know you can afford to repay the loan so it’s likely they’ll ask for evidence. This is likely to be one of more of these documents and details:

  • your business plan
  • management accounts (records of your profit and loss, cashflow, forecasting)
  • previous years’ accounts
  • details of assets owned by your company
  • details of other business loans or overdraft
  • details of any personal loans, mortgage, overdraft and credit card debt

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?

With a Recovery Loan, your repayments will start straight away. This is different from Bounce Back Loans, where borrowers don’t have to make any repayments for the first 12 months.

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?

Lenders set their own interest rates and fees but the rules state that the interest rate must not be more than 14.99%.

With a Recovery Loan, you’ll have to pay any fees upfront and you’ll pay the interest yourself from the start. This is different from Bounce Back Loans, where the government pays the interest for borrowers for 12 months and borrowers don’t have to make any repayments for the first 12 months.

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 aren’t allowed to take personal guarantees. For loans of more than £250,000 lenders can ask for a personal guarantee which would mean you and any other directors would be liable to repay the loan if your business fails.

But 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 31 December 2021. The government will review this nearer the time. But bear in mind that lenders can choose to close applications sooner.

How are Recovery Loans different from other government business loans?

The Recovery Loan Scheme differs from the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme in several significant ways:

  • The Recovery Loan Scheme will continue until 31 December 2021
    The Bounce Back and Coronavirus Business Interruption Loan Schemes both close on 31 March 2021.
  • You’ll pay lender fees upfront
    With a Recovery Loan, you’ll pay any fees charged by your lender to arrange the loan. This is different from Bounce Back Loans where the government paid the fees for borrowers.
  • You’ll pay interest yourself from the start
    With Bounce Back Loans, the government pays the interest for borrowers for 12 months.
  • You’ll repay the loan from the start
    With Bounce Back Loans, borrowers don’t have to make any repayments for the first 12 months.

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What other coronavirus 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:

  • Government grants, loans and financial support for businesses
    Our guide lists all the government coronavirus grants and loans available for businesses, with more detail on who’s eligible and how to apply.
  • 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. If your business is based in 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.

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About the author:

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

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