We’ve had lots of questions about the new Recovery Loan Scheme and how it compares with the previous government loan schemes, which ended on 31 March 2021, and the other commercial loan opportunities that are available.
With this in mind, we’ve created this handy comparison chart.
| Bounce Back Loan | CBIL | Recovery Loan | Commercial Loan | |
| Minimum Amount | £2,000 | £50,001 | £1,000 | No minimum |
| Maximum Amount | £50,000 | £5m | £2m | No maximum |
| Interest Rate | 2.5% | Set by lender | Set by lender. Max 14.99% p.a. incl. fees | Set by lender |
| Fees | None | None | Yes – set by lender | Yes – set by lender |
| Term | Up to 10 years | Loans and asset finance: Up to 6 yearsOverdrafts and invoice finance: Up to 3 years | Loans and asset finance: Up to 6 yearsOverdrafts and invoice finance: Up to 3 years | Any |
| Government Guarantee to lender | 100% | 80% | 70% | None |
| Directors’ Guarantee | No | Possible and then only for loans >£250k | Likely | Likely |
| Other Security | No | Possible, but not a director’s principal home | Possible, but not a director’s principal home (to be confirmed) | Likely |
| Repayment Holiday | No interest or capital repayments for 12 months. Option to pause repayments completely for another period of 6 months. Option to move to interest-only payments for a period of 6 months once repayments start (you can use this option up to 3 times) | No interest or capital repayments for 12 months | None | Negotiated with lender. Capital repayment holidays are non-standard on most business and asset finance loans. Interest repayment holidays are extremely rare. |
| Affordability Checks | No | Yes | Yes | Yes |
| Purpose | Continuation of business during the pandemic | Continuation of business during the pandemic | Recovery of business post pandemic, including investment | Any commercial purpose. |
| Eligibility | Trading in the UKViable or viable were it not for the pandemic.Not subject to insolvency proceedings | Trading in the UKViable or viable were it not for the pandemic.Not subject to insolvency proceedings | Trading in the UKViable or viable were it not for the pandemic.Not subject to insolvency proceedings | Criteria set by lender. |
| Minimum trading | 2 years | 2 years | None | None |
| Providers | 29 accredited lenders, including the main banks. | 118 accredited CBILS lenders, including the main banks. | Multiple accredited lenders offering loans, overdrafts, invoice finance and asset finance. | Multiple banks and specialist and alternative finance providers. |
As you can see, the most significant difference is in the availability of repayment holidays for capital and interest and now, following the August 2022 update, the likely requirement for personal guarantees. The government has been keen to make repayment of the Bounce Back Loans and CBILS loans as frictionless as possible for businesses. This largesse, however, has ended and repayment of a Recovery Loan will be very much along traditional lines.
The acid test will be in the interest rates and the fees that the lenders choose to charge for Recovery Loans. The maximum annualised rate that an accredited lender can charge, including fees is 14.99%. A commercial loan will be infinitely more flexible than a Recovery Loan and the right route for any set of circumstances will be a matter of weighing up the costs and the benefits.
As always, please contact us for advice.