What is the Recovery Loan Scheme (RLS)?

The Recovery Loan Scheme is set to replace the existing coronavirus finance support schemes (the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS)). The scheme will run from 6 April 2021 until 31 December 2021, subject to review. The existing CBILS closes for applications at the end of March 2021 and so this will be seen as a welcomed replacement for many businesses which have struggled as a result of the pandemic.

How the Recovery Loan Scheme differs

The maximum value of a facility provided will be £10 million per business and once received, the finance can be used for any legitimate business purpose, including growth and investment. The government guarantees 80% of the finance to the lender.

The main difference with the RLS to the existing COVID-19 schemes is that there are no turnover restrictions: businesses of any size can apply for finance under the RLS, the maximum loan amount available to each business is £10,000,000.

Another difference between the RLS and existing COVID-19 financial support schemes is to do with interest and fees that are payable on the loan. The British Business Bank will no longer pay the borrower’s interest and fees for the first 12 months. This means the borrower will have to pay the interest themselves from day one.

No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

Types of finance available

Term loans and overdrafts will be available between £25,001 and £10,000,000 per business.

Invoice finance and asset finance will be available between £1,000 and £10,000,000 per business.

The term of the loans will be as follows:

  • Up to six years for term loans and asset finance facilities.
  • Up to three years for overdrafts and invoice finance facilities.

Eligibility criteria for Recovery Loan Scheme

You will be able to apply for a loan if your business:

  • is trading in the UK

You will need to show that your business:

  • is viable or would be viable were it not for the pandemic;
  • has been impacted by the coronavirus pandemic; and
  • is not in collective insolvency proceedings.

Businesses which have taken out a CBILS, CLBILS or BBLS facility previously will be able to access the new scheme, although the maximum they will be allowed to borrow will depend on the individual lender’s assessment and scheme requirements. The approach may vary between lenders but all businesses will have to meet all other eligibility criteria.

Why use a broker?

Like any type of business finance, the recovery loan scheme is provided by a panel of accredited lenders. The application process for the scheme is the same as applying for any type of business finance and there is a possibility of lenders turning you down.

A broker can help you find the right type of finance for your needs and with access to a wider range of different lenders they can help find a lender that is most likely to accept your application.

Our advisers can help to package and present your application so it meets credit policy, this can help speed up the process so you can access your funding sooner.

With specialised Commercial Finance experience, our advisers are likely to have a wider breadth of experience than your direct bank contact, especially in dealing with complex cases.

Once your funding is secured, our advisers will continue to support your business by helping you to work through any initial teething problems and making sure that your funding continues to work in the long term.