Recovery Loan Scheme compared

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 £10m 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 years
Overdrafts and invoice finance: Up to 3 years
Loans and asset finance: Up to 6 years
Overdrafts and invoice finance: Up to 3 years
Any
Government Guarantee to lender 100% 80% 80% None
Directors' Guarantee No Possible and then only for loans >£250k Possible and then only for loans >£250k Likely
Other Security No Possible, but not a director's principal home Possible, but not a director's principal home 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 UK
Viable or viable were it not for the pandemic.
Not subject to insolvency proceedings.
Trading in the UK
Viable or viable were it not for the pandemic.
Not subject to insolvency proceedings.
Trading in the UK
Viable 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. 18 accredited lenders at launch, which we expect to grow to mirror the existing CBILS list (t.b.c.) 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. 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.

 

Photo by Umanoide on Unsplash


Recovery Loan Scheme compared


By: Neil Edwards

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