UK businesses struggling with economic uncertainty may have been thrown a lifeline with the extension of the Recovery Loan Scheme – a low-cost borrowing initiative which is backed by the government.
The scheme was first launched in April 2021 as a replacement for the Coronavirus Business Interruption Loan Scheme (CBILS), introducing one crucial difference – businesses applying for the borrowing were no longer required to have been directly impacted by the COVID 19 pandemic.
It was initially set to run until December 31st, 2021, but in the Autumn Budget 2021 the then Chancellor decided to extend the scheme by six months, leaving it open to June 2022.
Now, with applications to that scheme closed, the government has announced a new iteration of the Recovery Loan Scheme, which is due to run until June 30, 2024, giving businesses extended access to the low-cost borrowing.
Under the scheme, businesses can borrow up to £2m to aid recovery from the COVID pandemic or simply to invest for the future. The government guarantees 70% of the borrowing, but the business’s assets could be called on to make good any default on repayment. However, the borrower’s private residence cannot be taken as security.
“The Recovery Loan Scheme has been a great success and has helped a lot of businesses bounce back from the economic turmoil of the past few years. One of the positives of the scheme is that unlike its predecessors, you don’t have to demonstrate your business was impacted by COVID to be eligible to apply, which means that it could provide low-cost borrowing for farmers facing a number of issues, such as soaring fuel, feed, and fertiliser prices. With the new iteration of the scheme having launched in August, now is a good time to look into it, to find out if it is right for your business.”
The scheme is open to businesses with a turnover of up to £45m, and covers a wide range of products including loans, overdrafts, asset finance, and invoice finance facilities.
The borrowing term can be as little as three months and runs to a maximum of six years.
Ian added that it was the flexibility of the scheme which made it particularly attractive to farmers.
“Because the funding can take a number of forms and over a term prescribed by the borrower, it can be tailored to meet a farmer’s current demands and situation,” he said. “Couple that with the fact it is relatively low-cost borrowing, 70% of which is guaranteed by the government, and it is certainly a viable option for farmers looking to secure new funding.”