What exactly is the Recovery Loan Scheme?
British Business Bank created the Recovery Loan Scheme to support businesses recovering and growing after being disrupted by the coronavirus. Funding11 accepts applications from businesses of all sizes and sectors for funding under this scheme.
Business can use the money for any legitimate business reason, including expanding and investing in your company. The government backs Recovery Loans to the extent of 80%, but the borrower is solely responsible for the loan.
What does it mean to be “guaranteed by the government”?
If the lender is unable to collect the borrower’s loan, the government will compensate the lender. The government guarantee makes Recovery Loans more appealing, even though lenders are not required to issue them. Lenders have more confidence that they’ll get their money back if you can’t repay your loan because the government guarantees 80% of it.
What kind of financing may I get under the Recovery Loan Scheme?
The Recovery Loan Scheme covers a variety of business financing options, and what lenders have to offer will vary. The amount you can borrow is determined by your company’s unique circumstances and the sort of financing you seek.
You can borrow anything from £25,001 and £10 million for term loans and overdrafts. You can borrow anything between £1,000 and £10 million for invoice finance and asset finance.
Am I eligible for a Recovery Loan?
Businesses from any industry are eligible to apply, and there is no limit on the amount of money they can make. If your company meets the following criteria, you may be eligible for a Recovery Loan:
- Minimum of 2-year trading history
- The coronavirus has impacted the business
- Must be a limited company or limited liability partnership (LLP)
- Trading in the UK
If your company is one of the following, you are ineligible:
- ‘Collective insolvency proceedings’ are a type of bankruptcy that involves a group of people.
- a bank, an insurance company, or a reinsurer (but insurance brokers are eligible).
- a public-sector organisation
- A primary or secondary school that receives funding from the government.
Is it possible to apply for a Recovery Loan if I’ve already received a government loan?
Yes, indeed. You can apply for a Recovery Loan if you’ve already had or are getting lending from one of the other coronavirus guaranteed loan programmes. You must also meet all of the other eligibility requirements.
What is the procedure for applying for a Recovery Loan?
You will soon be able to apply for a Recovery Loan on our website, but in the meanwhile, you can call us at +44 (0) 203 475 9299 to make an application over the phone.
When I apply for a Recovery Loan, what documents will I need?
- The latest set of filed accounts
- Last six-month business bank statements
- Information about any other company loans or overdrafts
Is a credit check required to obtain a Recovery Loan?
Lenders will run credit checks on all candidates for government Recovery Loans. Lenders must also do fraud checks.
When must I begin repaying a Recovery Loan?
Your repayments on a Recovery Loan will begin right away. This contrasts with Bounce Back Loans and the Coronavirus Business Interruption Loan Scheme, which require no repayments for the first 12 months.
The length of time you have to repay the loan is determined by the sort of loan you take out. You have up to six years to repay term loans and asset finance, while you have up to three years to repay overdrafts and invoice finance.
What are the recovery loan interest rates and fees?
According to the rules, lenders choose their interest rates and fees, but the interest rate cannot exceed 14.99 per cent.
Funding11 interest rate starts at 4.3 per cent for a Recovery Loan and goes up to 12.1 per cent a year. With a Recovery Loan, you’ll have to pay any fees upfront, and you’ll be responsible for paying the interest from the beginning.
Is it necessary for me to provide a personal guarantee to obtain a Recovery Loan?
It depends on the amount of money you borrow. Personal guarantees are not required for Recovery Loans of less than £250,000. For loans of more than £250,000, however, lenders may require a personal guarantee, which means you and any other directors would be responsible for repaying the debt if your company fails. However, lenders cannot use your home (‘primary private dwelling’) as security no matter how much money you borrow.
What is the deadline for the government’s Recovery Loan Scheme?
The Recovery Loan Scheme will expire on December 31, 2021. The government will conduct a review at a later date. However, keep in mind that lenders have the option of closing applications sooner.