Recovery Loan Scheme extension

The government has extended the Recovery Loan Scheme for additional two years. This is a crucial support to small businesses, especially during the current economic landscape, and was confirmed by Business Secretary Kwasi Kwarteng last month. It is part of other government methods to help businesses with cost pressures, such as increasing the Employment Allowance, slashing fuel duty, and introducing a 50% business rates relief for eligible businesses.

The Recovery Loan Scheme was introduced in April 2021 and was aimed at helping businesses to recover from the Covid-19 pandemic. Up until today, the scheme has helped almost 19,000 businesses with an average of £202,000 in support. The Recovery Loan Scheme offers government-backed loans to small businesses and gives lenders a government-backed guarantee against the outstanding balance of the facility.

Recover Loan Scheme extension & eligibility

Whilst the Recovery Loan Scheme was already extended by 6 months up until June 2022, concerns about the impact of shutting off the emergency measures during this difficult economic environment encouraged the government to rethink and extend this scheme further. 

Under the latest extension, the requirement for businesses to certify that they have been affected by the COVID-19 pandemic will no longer apply. To lend through the scheme, lenders will be required to certify that they would not have been able to offer a facility to the business on their normal commercial terms, or that they would have only been able to do so at a higher interest rate.

Applications to the new business loan scheme will open on 1 August 2022 and will run until 30 June 2024.

The principle behind the extended scheme remains unchanged. The government will underwrite 70% of lender liabilities, at the individual borrower level, in return for a lender fee. Lenders must ensure that the benefits of the government guarantee are passed through to businesses.

The maximum loan size remains at up to £2m. However, recognising that businesses and the UK are in a better position than during the pandemic, lenders may now require a personal guarantee from the borrower, in line with standard commercial practice.

You can apply for a loan if your business is trading in the UK. Businesses from most sectors can apply, except banks, building societies, insurers and reinsurers, public-sector bodies, state-funded primary and secondary schools.

The maximum length of the loan depends on the type of finance your business applies for and will be:

• up to 3 years for overdrafts and invoice finance facilities
• up to 6 years for loans and asset finance facilities

For more information about the Recovery Loan Scheme, please visit the official website.