Recovery Loan Scheme: New support for businesses with coronavirus-related debt

Although the Bounce Back and Coronavirus Business Interruption Loan Schemes have closed to new applications, the government is providing more support for businesses struggling with coronavirus-related debts.

This latest round of support comes in the form of the ‘Recovery Loan Scheme’.

What is the Recovery Loan Scheme?

Intended to help businesses recover through the lockdown easing and the country fully reopening, the scheme allows businesses access to asset and invoice finance, as well as term loans and overdrafts from accredited lenders.

Loans can be for up to £10 million per business. While the borrower is liable, amounts up to £250,000 don’t require personal guarantees from the borrower, with the government guaranteeing the lender 80% of the finance.

The length of these facilities is between 3 and 6 years depending on the type of finance.

The Recovery Loan Scheme is currently expected to stay open until 31st December 2021.

Who can apply?

Businesses of any size can apply for the Recovery Loan Scheme, as long as:

• They are trading in the UK.
• Business owners can prove the pandemic has impacted them negatively.
• The business would be viable if not for the pandemic.
• It is not undergoing an insolvency procedure. (Different rules apply in Northern Ireland).
• The business has received previous coronavirus-guaranteed loan schemes.

What other support is available?

If your business is struggling with coronavirus-related debt but isn’t eligible for the new loan scheme, there are other company recovery options available to help repay what you can afford or restructure its unprofitable parts.

• Repay in affordable instalments
  If you wish for the company to continue trading while repaying what it can afford to its unsecured creditors, you can apply for a Company Voluntary Arrangement (CVA). These are formal repayment arrangements wherein the company makes a monthly payment to a licensed insolvency practitioner, repaying the creditors over five years.
  More on Company Voluntary Arrangements
  If most of your debt is to HMRC, you can apply for a specific, informal payment arrangement. A Time to Pay Arrangement (TTP) allows businesses to repay National Insurance contributions, PAYE, Corporation Tax and VAT over six to twelve months at a tailored rate.
  More on Time to Pay Arrangements
• Restructure the company
  Sometimes, a company will need more significant restructuring if repaying the debt won’t be sufficient. In these circumstances, you can explore administration. Administration involves a licensed insolvency practitioner taking control of the company and making the necessary changes before finding a buyer.
  More on administration
• Close the company
  If the company’s debts are so severe that recovery isn’t feasible or possible, directors can close it through a Creditors Voluntary Liquidation (CVL). A CVL allows the directors to close an insolvent limited company where there is little to no chance of repaying its debts. Closing this way means the debts die with the company and provides the opportunity to start again afterwards.
  More on Creditors Voluntary Liquidations

Summary

The government has introduced a new support scheme to help businesses through the tentative reopening as lockdown measures ease. The Recovery Loan Scheme is open to most businesses operating in the UK, granting them access to various types of finance, up to £10 million per business from accredited lenders. The scheme is currently open and is expected to stay until the end of 2021.