Business owners can now apply for ongoing access to financial support as they recover and grow following the coronavirus pandemic.

The scheme can be used for any legitimate business purpose, including managing cashflow, investment and growth. It is designed to appeal to businesses that can afford to take out additional debt finance for these purposes.

The Scheme is scheduled to run until 31 December 2021, subject to review. It is available through a range of lenders and partners accredited by the British Business Bank

If you have already used a Coronavirus Loan Support Scheme, the Recovery Loan Scheme is still open to you.

www.gov.uk/government/news/new-bounce-back-loans-to-launch-today

 

  1. What is The Recovery Loan Scheme?
  • The Recovery Loan Scheme is intended to assist small and medium-sized businesses to access finance up to £10 million per business (maximum £30 million per group).
  • Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts;
  • Term loans and asset finance facilities are available for a minimum of three months to up to six years, with overdrafts and invoice finance available from up to three months to three years.;
  • Unlike the previous Government-backed loan schemes, Coronavirus Business Interruption Loan Scheme (CBIL) and Bounce Back Loan Scheme (BBL) loans, businesses must meet the costs of interest payments and any fees associated with the facility;
  • The scheme provides the lender with a government-backed guarantee against the outstanding balance of the facility, although the borrower always remains 100% liable for the debt.

 

  1. What Are The Terms Of The Recovery Loan Scheme?
  • The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%;
  • Lenders cannot take personal guarantees for facilities of £250,000 or less. Above £250,000, the maximum amount that can be covered is capped at a maximum of 20% of the outstanding balance of the facility after the proceeds of business assets have been applied. No personal guarantees can be held over principal private residences.
  • Loan terms will be up to 6 years.
  • No repayments will be due during the first 12 months.

 

  1. Eligibility
  • Your business must:
    • have been affected by Covid-19 – you will need to confirm to the lender that the coronavirus pandemic has had an impact on your ability to operate;
    • be carrying out trading activity in the UK;
    • have a viable business proposition – your lender may disregard (at its discretion) any concerns over your business’ performance over the short to medium term because of the uncertainty and impact of Covid-19;
  • There is no restriction on turnover, meaning your business can access the scheme regardless of what amount of revenue it generates.
  • You will not be eligible if your business is a Bank, a public sector body or a state-funded primary or secondary school

 

  1. How to Apply For the Scheme
  • Find a lender on the British Business Bank website

https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/current-accredited-lenders/

  • Contact a lender to express an interest in applying for the Scheme, and for them to be able to assess your eligibility under their criteria and available finance offered under the Scheme by them;
  • Submit an application
    • Typically you will be asked for supporting information to show evidence that you are able to afford the repayments, most likely in the form of management accounts, business plan, historic accounts and details of assets.
  • Please contact one of our specialists for advice and assistance in preparing your claim

 

  1. What Should I Consider Before Making An Application
  • Fundamentally, this is a loan and requires repayment;
  • When considering how much loan is required, consider carefully the current financial position of your business as well as the impact upon your business of market conditions normalising, or even growing beyond historic trading levels, as the impact of COVID-19 fades.
  • Take into account issues like
    • Does the business need capital investment;
    • What working capital stretches will I encounter as I rebuild levels of stock and work in progress;
    • What impact on my business will my growing debtor book have on available cash;
    • What loan repayments am I already committed to, remembering that any CBIL or BBL loans have either expired or are coming up toward the end of, the 12-month interest and capital holiday;
    • Any deferral of Government or finance based repayments that will need to be taken from working capital
  • You should prepare a (simple) cash and trading forecast to support your assessment, and ensure you have claimed all other reliefs and grants available to you.
  • Barrons are here to help you, please refer to the specialists above or your usual Relationship Manager who will be happy to help.