Launched on 6 April 2021, the new government-backed Recovery Loan Scheme (RLS) promises businesses continued financial support as the earlier coronavirus loan schemes such as BBLS and CBILS come to an end. Similar to those earlier funding initiatives, the scheme aims to support businesses which have been impacted by the pandemic by providing funding for any genuine business purpose, including cashflow management, investment and growth.
Access of up to £10 million per business will be available, at the discretion of the individual lender and businesses of all sizes can access the scheme. A range of loans and alternative forms of finance will be available.
Who is eligible?
The RLS is available to the following UK trading businesses
- Sole traders
- Limited companies
- Limited partnerships
- Limited Liability Partnerships
- Co-operatives and community benefit societies
- Charities and further education establishments
- Any other type of entity carrying out a business activity in the UK \
(assuming more than 50% of turnover is generated from trading activity in the UK)
As a requirement of the scheme, borrowers will need to demonstrate that their business:
- has been adversely impacted by the pandemic
- would not be facing financial difficulty it wasn’t for the pandemic
- is not involved in collective insolvency proceedings
Any business that has received support under one of the previous COVID-19 loan schemes, will still be eligible for the RLS, assuming, that they meet all other eligibility criteria.
What support is available?
Financial support is available in the following forms:
- loans or overdrafts (£25,001 to £10 million per business)
- invoice or asset finance (£1,000 to £10 million per business)
Loans are available for up to three years for overdrafts and invoice finance, and for up to six years for loans and asset finance.
Additionally, and at the discretion of lenders, capital repayment holidays and/or interest free periods may be available. However, these features are not central to the scheme.
Security may be required (a borrower’s principal private residence cannot be used) and personal guarantees may be needed for amounts over £250,000.
The Government guarantees 80% of the finance to the lender, to ensure that lending facilities are more widely available and affordable than they might otherwise be. As always though, the borrower remains liable for 100% of the amount borrowed. The maximum annual effective interest rate for finance borrowed under the RLS is 14.99%.
Individual lenders will have their own specific lending terms and the availability of support is also at the discretion of the lender. Standard credit and fraud checks will apply and applicants will need to demonstrate their ability to repay the loan. Proof of this usually includes information such as:
Borrowers should bear in mind that loan administration fees and interest charges are not covered by the Government (as they were under previous COVID-19 loan schemes).
The RLS is administered by the British Business Bank and further information, including lenders and FAQs can be found on their website:
The scheme will remain open until 31 December 2021, but this date is subject to review.