The Recovery Loan Scheme (RLS) launched today aimed at providing financial support to businesses across the UK as they recover and grow following the coronavirus pandemic.

You can apply if Covid-19 has affected your business, you can use the finance for any legitimate business purpose – including managing cashflow, investment and growth.

If your business has already borrowed from any of the other coronavirus loan schemes such as:

  • the Bounce Back Loan Scheme (BBLS)
  • the Coronavirus Business Interruption Loan Scheme (CBILS)
  • the Coronavirus Large Business Interruption Loan Scheme (CLBILS)

the RLS is still open to you, although the amount you have borrowed under an existing scheme may limit the amount you may borrow under RLS.

RLS is set to run until the 31st December 2021, but is subject to review.

How it works

Lenders

The RLS will 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 RLS is to improve the terms on offer to businesses, 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.

Types of finance

Lenders 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 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

Key features of the scheme

Up to £10m facility per business

The maximum amount of a facility provided under the scheme is £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Guarantee to the lender to encourage lending

The scheme gives the lender a government-backed guarantee against the outstanding balance of the facility.

As the borrower, you remain 100% liable for the debt.

Interest and fees to be paid by the business from the outset

Businesses are required to meet the costs of interest payments and any fees associated with the RLS facility.

The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.

Term length

For term loans and asset finance facilities: from three months up to six years.

For overdrafts and invoice finance facilities: from three months up to three years.

Personal guarantees

Personal guarantees are not permitted for facilities of £250,000 or less. 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.

Turnover limit

There is no turnover restriction for businesses accessing the scheme.

Access to multiple schemes

Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme, although the amount they have borrowed under an existing scheme may in certain circumstances limit the amount they may borrow under RLS.

Speak to an expert

Whatever finance options you’re looking at, our experts can help, book a FREE appointment with our Corporate Finance team here.