How to Apply for the Recovery Loan Scheme

Published in Business by Content Team

The recovery loan, which is the latest initiative of the UK government has just been announced just as the head of Barclays Bank in the UK recently predicted that the country in 2021/2022 is set to experience the biggest economic boom since 1948 meaning there is likely to be rapid economic growth at rates not seen since then. While this is coming on the heels of the biggest economic downturn in the past 300 years.

As a way to support Businesses (who are our only clients and whose losses also negatively impact us), we previously shared a post outlining 10 resources UK businesses can utilise to tide over the negative effects of the pandemic and it was really helpful to those who responded to the mailing.

Following up on that, this post is to create awareness on the recovery loan scheme announced by Rishi Sunak in March 2021 which would be accepting applications till 31st December 2021 so let’s go straight to it:

Recovery Loan Scheme?

The recovery loan is a new loan created to replace the Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) which was made to help UK businesses recover from any loss of business incurred during the coronavirus pandemic.

These loans can be used for any genuine business expense, and businesses of all sizes from most sectors can request for up to £10 million from any of the accredited lenders.

Recovery loans are 80% guaranteed by the UK government although the borrower is fully liable for the debt. This means that if the lender is unable to recover the loan, they would be reimbursed 80% by the government making it a compelling scheme for lenders.

What types of loans can be taken?

Finance through the recovery loan scheme can be obtained as revolving loans/overdrafts, term loans, invoice or asset finance.

The amount you can borrow depends on the trading status of your business, the type of loan you need as well as the specific lender you are borrowing from meaning if you want an overdraft or a term loan, you can borrow between £25,000 and £10 million while businesses needing invoice or asset finance can get between £1,000 and £10 million.

Different institutions offer different forms of finance.

Eligibility for the recovery loan

For you to be eligible for the recovery loan, your business has to

  • have been negatively impacted by the coronavirus pandemic
  • be viable or would have been viable had there been no pandemic
  • be currently trading in the UK

While businesses from most sectors can apply and there is no turnover limit applicable, some businesses are not eligible for recovery loans and these are:

  • Public-sector bodies
  • Banks, Insurers and re-insurers
  • Businesses in collective insolvency proceedings
  • state-funded primary or secondary schools

Can beneficiaries of other government loans apply for the recovery loan?

If you have previously received a government guaranteed loan such as the BBL or CBILS, you can also apply for the recovery loan.

Please note that the other criteria for eligibility would still have to be met.

How do I apply for a Recovery Loan?

Finally, we get to the topic of the post!

To apply for a recovery loan, you have to:

Lenders are not allowed to take personal guarantees (meaning you and any directors would repay the loan if the business fails) for facilities of less that £250,000 and are also not allowed to use your home (‘principal private residence’) as collateral.

You can approach other lenders if the first you contacted turned you down.

Lenders would carry out credit and fraud checks as part of the process for approving the recovery loan.

What documents are needed to apply for a Recovery Loan?

Accredited lenders would have to carry out due diligence in order to know if a recovery loan is right for your business and if you would be able to afford the repayments.

Some documents that might be needed for your application are:

  • Accounts for the previous and current year
  • An asset register
  • Other loans the business is liable for
  • Details of personal credit owed by directors and
  • A business plan.

Other forms of documentation might be requested but these are the most likely depending on your situation and the kind and amount of financing requested.

What is the duration and when would repayments for the recovery loan start?

The repayment period for a recovery loan would vary depending on the type of loan drawn. Businesses that request for overdrafts and invoice finance would have up to three years to make repayments while those who take term loans and asset finance can repay in six years.

Unlike the bounce back loan, where no repayments are due till 12 months after it has been approved, payments on the recovery loan are meant to start immediately.

What is the interest rate for the recovery loan?

The guidelines for issuance of this scheme state that maximum interest rates must not exceed 14.99% although accredited lenders are allowed to set their own interest rates and fees.

Unlike the BBL where the government would pay the interests for the first 12 months, borrowers would pay all fees in this case upfront and would also be liable for any interest accrued.


Hopefully this helps for anyone seeking funding to get their UK business back on track in 2021!

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