The Recovery Loan Scheme (RLS) was announced by the Chancellor in the Spring Budget and replaces the previous coronavirus loan schemes (Bounce Back Loan Scheme / Coronavirus Business Interruption Loan Scheme / Coronavirus Large Business Interruption Loan Scheme), which closed to applications at the end of March 2021.
The RLS has been designed to help businesses of any size as they grow and recover from the disruption of the Covid-19 pandemic. It was launched on 6 April and is open until 31 December 2021 (subject to review).
Businesses who have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme.
Details about the scheme
The Recovery Loan Scheme (RLS) is a government backed loan scheme for businesses. The scheme supports borrowing of up to £10m for individual businesses and up to £30m across a group, and, once received, the funds can be used for any legitimate business purpose, including managing cashflow, growth and investment.
Unlike the previous coronavirus loan schemes, the government will not provide Business Interruption Payments (BIP) to cover interest payments.
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.
How can you access the Recovery Loan Scheme?
If businesses have concerns about their finances, they should contact their lender for support as early as possible. Lenders’ dedicated Covid-19 support pages will provide further information. Borrowers can apply for lending in the normal way. If a lender is accredited for RLS and considers it appropriate, they will inform the customer if the RLS is an option for them. For customers with strong credit propositions and available security, conventional lending may be more attractive.
What are the criteria for businesses to be eligible for this scheme?
To be eligible for the scheme a business must be:
- Able to confirm that it has been impacted by the coronavirus (Covid-19) pandemic.
- Trading in the UK
- Seeking a facility of between £25,001 and £10 million (for loans and overdrafts)
- Or between £1,000 – £10 million for asset and invoice finance
(individual lenders will set their own minimum and maximum thresholds within this range)
- Must not be in collective insolvency proceedings (NI businesses must not be an ‘undertaking in difficulty’ – see below)
- Operating in any business sector, except:
- Banks, building societies, insurers
- Public-sector bodies
- State-funded primary and secondary schools
- Able to evidence viability.
Guarantees
Recovery Loan Scheme 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.
To know more about Recovery Loan Scheme, please get in touch with our expert advisors.
