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Recovery Loan Scheme

The UK Government’s Recovery Loan Scheme provides businesses with access to finance to help them grow and recover from the disruption caused by the Covid 19 pandemic.

The scheme is currently open to businesses of all sizes to help them access loans and other finance to help them recover from the pandemic.

Up to £10 million is available per business to those that apply before the 31st December 2021. The funds can be used for any legitimate business purpose including but not limited to managed cashflow, buying new equipment, investment, and growth

In the recent Autumn budget, Rishi Sunak announced some changes to the Recovery Loan scheme.

The programme, which started in April 2021, will now run until 30 June 2022.

  • As of January the 1st 2022 the scheme will be available to small or medium-sized businesses or enterprises
  • The maximum amount of funding available will be £2 million per business reduced from £10 million
  • The guaranteed coverage that the government will provide to lenders will be reduced from 80% to 70%

Through the scheme businesses are able to access and choose from four different types of loans


Term Loans from £25,001 to £10 million (until 31st December 2021) for up to 6 years

A term loan is a loan from a bank or alternative finance lender for a set amount. It must be repaid in accordance with the set and agreed upon repayment schedule with a fixed or variable interest rate.


Business overdraft from £25,001 to £10 million (until 31st December 2021) for up to 3 years

A business overdraft offers you a line of credit that gives you more cash flow than your business can fund from its own capital. You must repay the amount you borrow in the overdraft, plus any interest.


Invoice finance from £1,000 to £10 million (until 31st December 2021) for up to 3 years

Invoice financing allows the borrower to use unpaid invoices as security for funding, therefore freeing up cash that is not currently available.


Asset finance from £1,000 to £10 million (until 31st December 2021) for up to 6 years

Asset financing allows companies to acquire an asset, for example, equipment and spread the cost of this over a fixed period. This frees up valuable working capital and at the end of the agreed loan term, you can choose to purchase the item outright, upgrade or return it.


How does the Recovery Loan Scheme work?

Up to the 31st December 2021, the government guarantees 80% of the funding to the lender. From January 1st, 2022, this will drop to 70%.

As the borrower, you are liable for 100% of the repayment of any financing and interest.

If you wish to take advantage of financing up to £250,000, you are not required to provide a personal guarantee.

For loans over £250,000 personal guarantees may be required but this is not held over your Principal Private Residence. Also, recoveries for unpaid loans are capped at a maximum of 20% of the outstanding balance, after the proceeds of business assets have been applied.


What are the fees for the Recovery Loan Scheme?

The government has placed a cap of 14.99% for interest rates, upfront fees and any other fees.


Who is eligible for the Recovery Loan Scheme?

To be eligible for the scheme you must be able to show that:

  • Your business has been impacted by the Covid-19 pandemic
  • Your business is trading in the UK
  • Have a viable business – your lender at its discretion may disregard any concerns over short to medium term business performance as a result of the pandemic

The following types of businesses CANNOT apply for the scheme:

  • Banks, Building societies, Insurers and reinsurers (excluding insurance brokers)
  • Public sector bodies
  • State-funded schools and secondary schools

When you apply for funding under the Recovery Loan Scheme, your lender will ask for evidence to show that you are able to repay the loan. It will also carry out the usual checks.

It is up to the lender to decide whether your business is eligible.


To find out further information contact us today to discuss your options


T. 020 3857 3030