UK launches Recovery Loan Scheme as lockdown restrictions continue to lift

The UK’s HM Treasury announced Tuesday a new government-backed loan scheme to help businesses as the country and economy emerge slowly from the COVID-19 winter lockdown. The second step of the government’s “roadmap out of lockdown” — from 12 April — will see nonessential shops, gyms, and hairdressers open, as well as pubs and restaurants that serve customers outside.

Under the Recovery Loan Scheme, businesses can apply for up to £10 million either through term loan, overdraft, invoice finance, or asset finance, the Treasury explained.

The actual amount offered and the terms are at the discretion of participating lenders.

UK Chancellor of the Exchequer Rishi Sunak said: “As we safely reopen parts of our economy, our new Recovery Loan Scheme will ensure that businesses continue to have access to the finance they need as we move out of this crisis.”

The scheme has the following additional elements:

• The government guarantees 80% of the finance to the lender. Borrowers are always 100% liable for the debt.
• Interest rates are capped at 14.99% and are “expected to be much lower than that in the vast majority of cases”, the government said.
• The scheme is open until 31 December, subject to review.
• Loans are available through a network of accredited lenders, as set out by the British Business Bank.
• The maximum length of the facility depends on the type of finance applied for: up to three years for overdrafts and invoice finance facilities; and up to six years for loans and asset finance facilities.

The loan scheme is restricted to businesses trading in the UK, except for banks, building societies, insurers and reinsurers (insurance brokers can apply), public-sector bodies, and state-funded primary and secondary schools.

To be eligible, businesses need to show that they:

• Would be viable were it not for the pandemic.
• Have been adversely impacted by the pandemic.
• Are not in collective insolvency proceedings (unless the business is in scope of the Northern Ireland Protocol, in which case different eligibility rules may apply).

Businesses that received support under the earlier COVID-19 guaranteed loan schemes are still eligible to access finance under this scheme if they meet all other eligibility criteria, the government said.

The British Business Bank set out how to apply for the scheme.

Government grants

Businesses in the nonessential retail, hospitality, leisure, personal care, and accommodation sectors can apply to their local council for a one-off Restart Grant, to reopen safely as COVID-19 restrictions are lifted.

Also, earlier, the government announced that smaller businesses can apply for grants of up to £2,000 to help them adapt to new customs and tax rules when trading with the EU.

The £20 million SME Brexit Support Fund enables practical support, such as training for new customs, rules-of-origin, and VAT processes.

— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.