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What support can my company get when Bounce Back Loans end?

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Accessing financial support through the Recovery Loan Scheme from 6 April 2021

The coronavirus pandemic continues to create financial difficulties for businesses throughout the UK, but the Bounce Back Loan Scheme (BBLS) that provided flexible emergency finance is coming to an end on 31st March 2021.

Continued government support is available under a new initiative called the Recovery Loan Scheme, announced by Rishi Sunak in the 2021 spring Budget, however. Other forms of support are also available for businesses, including the Coronavirus Job Retention Scheme (CJRS), which is open until the end of April 2021, and the VAT new payment deferral scheme.

The Recovery Loan scheme is intended to support business recovery and growth when Bounce Back Loans end, so how does it work and could you be eligible for this type of funding?

What is the Recovery Loan Scheme?

The Recovery Loan Scheme comes into effect on 6th April 2021 and is currently set to run until 31st December 2021. Any size of business can access funding under the scheme as long as it trades in the UK, and the money should be used for legitimate business purposes, such as improving cash flow, or growth and development.

The government is providing an 80% guarantee on Recovery Loans, which will replace the previous coronavirus loan schemes. The guarantee encourages lenders to offer this vital funding, but liability for repaying outstanding amounts remains with the borrower.

How does the Recovery Loan Scheme work?

Term loans and overdrafts are available through the Recovery Loan Scheme, as well as invoice finance and asset finance:

  • Term loans and overdrafts of £25,001 - £10 million per business
  • Invoice finance and asset finance of £1,000 - £10 million per business

For invoice finance and overdrafts, the terms are up to three years, and term loans and asset finance will be offered on terms of up to six years. As with the Bounce Back Loan Scheme, there will be a range of accredited lenders offering funding to support business recovery as the economy reopens.

Personal guarantees won’t be needed for funding of up to £250,000 under the Recovery Loan Scheme, and for loans above this amount, a director’s Principal Private Residence cannot be used as security. This means that if you need funding of £250,000 or more, your main home will be protected if the company cannot afford to repay.

Eligibility requirements for the Recovery Loan Scheme

Your business must trade in the UK to be eligible for the scheme, plus:

  • It must have been negatively affected by the coronavirus pandemic
  • It must be viable, or viewed as viable if the pandemic hadn’t been a factor in its decline
  • The company must not already have entered any formal insolvency procedures

If you’ve already borrowed under BBLS, CBILS, or CLBILS, you’re still eligible to apply for a Recovery Loan.

The Recovery Loan Scheme is set to offer more confidence to businesses as the economy opens up, but other forms of support are also available when Bounce Back Loans end. One fundamental form of support that can underpin survival and business growth is licensed insolvency advice.

Professional insolvency support when Bounce Back Loans end

Professional insolvency support is crucial for businesses in financial distress, whether that’s due to coronavirus or for any other reason. UK Liquidators has extensive experience of helping directors industry-wide, and can provide the support you need.

If you fear that liquidation is inevitable we can assess your company’s financial position and outlook, and clarify your options. There may be appropriate rescue measures available, or other sources of funding that you haven’t considered.

If liquidation is unavoidable, however, we can also support you through the entire process, ensuring you meet your legal obligations as a director.

What other support is available after Bounce Back Loans?

VAT Deferral New Payment Scheme

If you deferred your VAT between 20th March 2020 and 30th June 2020, and are still finding it difficult to pay, you can apply to join the government’s new payment scheme. This is open until 21st June 2021 and can support your cash flow by allowing you to make the outstanding payments in equal instalments, interest-free.

For more guidance on this and other forms of support available to your company when the Bounce Back Loan scheme ends, please contact our expert team at UK Liquidators. We can arrange a free, same-day consultation, and work from offices around the country.

Jonathan Munnery
Partner

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