Recovery Loans Scheme Explained

Launched on 6th April, the aim of the Recovery Loan Scheme is to create the next stage in the funding market; providing continued support to businesses impacted by Covid-19 as they prepare for the reduction in restrictions and return to trading. There are some key differences from the previous schemes, for starters the BIP (Business Interruption Payment) is gone – the element that covered interest and fees in the first 12 months.

Here’s what we know about these loans so far:

Future plans
Very early feedback on the Recovery Loan Scheme is that it is focused more on future plans and less around historic serviceability from 2019. This is a significant change but time will tell what it means in practice. For many sectors and businesses working off 2019’s financial position has always been redundant so looking at future plans can only be beneficial. We’ll be staying close to this throughout and keeping you updated – talk to us early as this will hinge on being, as ever, the right fit for the right circumstance to the right funding option/partner at the right time.

Accredited lenders 
There is only a small number of accredited lenders currently on the panel, but much like CBILS, we expect this number to increase over the coming weeks. Feedback from some funders is they’re holding back until May and June to launch. This just allows them to reset and reorganise around the new scheme, and the changes in criteria in line with the above.

Super Deduction
The Recovery Loan Scheme comes on top of the Super Deduction announced as part of the Budget. For two years from April 2021, a company’s investments in plant and machinery will qualify for a 130% capital allowance deduction, providing 25p off company tax bills for every £1 of qualifying spending on plant and machinery. The policy aims to spur post-pandemic growth and give the government more corporate profits to tax come 2023.

Looking at the detail as we stand, utilising Hire Purchase agreements to invest in new plant and machinery complies with the scheme. The treasury have clearly identified the longer term impact of the pandemic being stalled business investment. This scheme looks to redress this, in the hope of investment over the 2 year period leads to taxable profits in the years to come.

With the 2 schemes running, now is clearly the time to consider future plans. How can this help your business deliver on its plans? If you have any questions, contact me on the details below or via our contact form.

Matt Lister | Operations Director |