Launched on 6 April 2021, the Recovery Loan Scheme (RLS) provides financial support to businesses across the UK as they recover and grow following the coronavirus pandemic.
You can apply to the scheme if Covid-19 has affected your business. You can use the finance for any legitimate business purpose – including managing cashflow, investment and growth. However, you must be able to afford to take out additional debt finance for these purposes.
If your business has already borrowed from any of the other coronavirus loan schemes – namely:
the Bounce Back Loan Scheme (BBLS)
the Coronavirus Business Interruption Loan Scheme (CBILS)
the Coronavirus Large Business Interruption Loan Scheme (CLBILS)
RLS is still open to you, although the amount you have borrowed under an existing scheme may in certain circumstances limit the amount you may borrow under RLS.
RLS will run until 31 December 2021, subject to review.
How it works
Lenders
The Recovery Loan Scheme will initially be available through a number of lenders accredited by the British Business Bank. New lenders under the scheme will be listed on the British Business Bank website as they become accredited.
A key aim of the Recovery Loan Scheme is to improve the terms on offer to you, but if a lender can offer you the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.
When looking to borrow, you should first approach your own finance provider – ideally via its website. You may also consider approaching other lenders if you’re unable to access the finance you need.
Types of finance
A lender can provide up to £10 million as one of the following facilities:
Term loan
Overdraft
Invoice finance
Asset finance
Guarantees
RLS gives the lender a government-backed guarantee against the outstanding balance of the facility. As the borrower, you are always 100% liable for the debt.
If you’re borrowing £250,000 or less
The lender won’t take any form of personal guarantee.
If you’re borrowing more than £250,000
The lender has the discretion to decide whether to take personal guarantees. However:
above £250,000, the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied
no personal guarantees can be held over Principal Private Residences.
The scheme is capped at a total loan facility of £10m per business (maximum £30m per group). Minimum facility size vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
The annual effective rate of interest, upfront fees and other fees cannot be more than 14.99%
Lenders will be required to undertake standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders.
Applicants for finance will need to provide certain evidence to show they can afford to repay the RLS-backed facility. This is likely to include the following: -
Management accounts;
Business plan;
Historic accounts;
Details of assets.
Chancellor Rishi Sunak said: "We have stopped at nothing to protect jobs and livelihoods throughout the pandemic and as the situation has evolved we have ensured that our support continues to meet businesses needs."
"As we safely reopen parts of our economy, our new Loan Recovery Scheme will ensure that businesses continue to have access to the finance they needs as we move out of this crisis."
So far the government's emergency loan schemes have supported more than £75bn of finance for 1.6m British businesses. The latest loan scheme is part of the government's unprecedented £350bn support package which has included paying million of workers' wages through the furlough scheme as well as generous grants and tax deferrals.
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