The COVID-19 pandemic has affected every one of us and it may have affected your finances too. Some people have been hit with emergency expenses while being furloughed or out of work, so have had to look at options like short term loans. Businesses have been impacted as well, with many suffering from having to shut up shop. To combat this, the government has set up a recovery loan scheme to try and help businesses and in turn, the economy bounce back. Keep reading to find out more about this scheme and if you meet the eligibility criteria.
What Is A Recovery Loan Scheme?
This scheme was set up to help businesses access finance from lenders to help them recover from lockdowns and support them as we emerge into a post-pandemic world. Businesses can apply for up to £2 million pounds; however, this amount isn’t a given for everyone. The amount is capped and how much your business receives is all down to the lender you choose. The government has said that they will guarantee 70% of the finance, but you will be completely liable for paying it off and making repayments. This scheme isn’t available from all lenders, so make sure you check before applying.
How Much Can I Get?
How much you want to borrow and how much you receive will be assessed by the lender. The recovery loan scheme offers finance in different ways. You can choose from overdrafts and invoices, or loans and asset finance. If you choose the former, you can get between £25,001 and £2 million. If you go with the latter, you can get between £1,000 and £2 million. It’s important to note that no personal guarantees are available for this scheme and your house can’t be used as collateral.
How Long Does It Last?
The terms depend on how much you borrow and what type of finance you receive. The term can be up to 3 years if you go for an overdraft and invoice finance. But, if you go for a loan or asset finance, it can last up to 6 years.
Who Can Apply?
The recover loan scheme is eligible for all small and mid-sized businesses, and the maximum anyone can borrow is £2 million. Your business must also be trading in the UK. When applying you have to demonstrate that your business wouldn’t be needing the finance if it wasn’t for the pandemic, showing that you do have a viable business model. You also need to prove that you haven’t been impacted by the pandemic to the point of insolvency proceedings too. Other lenders may have criteria in regard to credit scores and such, so it’s crucial that you check all this beforehand.
Who Isn’t Eligible?
Although this scheme was set up to help businesses, there are some that won’t be able to apply. For example, banks and building societies, insurers, or reinsurers can’t apply. Public-sector bodies and state-funded primary/secondary schools aren’t eligible either. As long as your business doesn’t belong to one of these sectors and meets the criteria, you should be able to apply.
The recovery loan scheme was designed to ensure the economy and businesses make it out to the other side of the pandemic. So, if you feel you might benefit from it, you might want to take advantage of it while you can as the above criteria and amounts reflect the changes brought during January 2022. Most likely, we can expect more changes to be made as we move towards a normal life and recover from the previous years.