Recovery Loan Scheme

Recovery Loan Scheme

As part of the Government’s support programme for businesses that have been affected by the COVID-19 pandemic, applications are now open for the £75 billion Recovery Loan Scheme (RLS). Any business that has been impacted is eligible to apply, even if they have used either the Bounce Back Loan or Business Interruption Loan schemes so far. Applications are open from the 6th April 2021 - 31st December 2021 and this loan is designed to support businesses through the final stages of lockdown.

Requirements For Eligibility

Just like with all of the other loan schemes, in order to qualify for the RLS you need to be able to prove that your business has been negatively impacted by COVID-19. The loan is only available to help fund business purposes (not personal), and this includes things like managing cash flow, investment and business growth.

Although you will be eligible for this loan if you have already tapped into the other schemes, the amount that you can borrow under the RLS may be limited, depending on the circumstances. It is also worth noting that there is no turnover restriction for businesses who are wanting to access this new scheme.

How The Scheme Works

There are several lenders that will be providing the funds for the RLS, and these have all been accredited by the British Business Bank. A full list of these lenders can be found on the British Business Bank website if you want to carry out your own checks. Here is a list of some of the lenders who have been accredited already: the Bank of Scotland, Barclays, HSBC, NatWest, Lloyds Bank, Paragon, RBS, Santander, Skipton Business Finance, Yorkshire Bank & Clydesdale Bank.

The aim of this Government-backed Recovery Loan Scheme is to improve the terms of finance that are available to businesses, but lenders have been advised that they should provide the best level of finance possible. Even if this doesn’t require the guarantee which is provided by the RLS directly.

Types of Finance Available

With this Recovery Loan Scheme, lenders are able to provide up to £10 million in one of the following ways: term loan, overdraft, invoice finance, asset finance or a guarantee. Now you may be wondering where the Government come in with this loan. This scheme gives the lender a Government-backed guarantee against the outstanding balance. The borrower is still 100% liable for the debt itself though, the Government will not be responsible for any repayments.

For loans that are less than or equal to £250,000 the lender does not require any form of personal guarantee. For any loans over the value of £250,000 the lender has the discretion to ask for personal guarantees if they feel this is necessary. The maximum amount that the Government will cover over this £250,000 under the RLS is a maximum of 20% of the outstanding balance. This is the balance calculated once the proceeds of the business assets have been taken into account.

Each business is limited to a total loan of £10 million (with a maximum of £30 million per group). At the other end of the scale, minimum loans vary and can start from £1,000 for asset and invoice finance, up to £25,001 for term loans and overdrafts. The Government have also stated that the annual effective rate of interest from lenders cannot be more than 14.99% (so they are unable to make large profits from businesses taking advantage of this scheme).

Applying For Finance

Lenders are entitled to undertake standard credit, fraud, Anti-Money Laundering and Know Your Customer checks for all businesses applying for the Recovery Loan Scheme. Whilst some of the previous loans have taken into account profits over the past few months which are as a result of the pandemic, that is not a requirement for this loan. The checks are likely to vary between lenders.

As with any loan, applicants will need to provide evidence to show they can afford to repay the RLS, and this can take any of the following forms:

• Management accounts
• Business plan
• Historic accounts
• Details of assets

Final Word From Rishi

When this Recovery Loan Scheme was announced, Chancellor Rishi Sunak released the following statement:

“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 Recovery Loan Scheme will ensure that businesses continue to have access to the finance they need as we move out of this crisis.”

It is predicted that this new Recovery Loan Scheme will provide an extra lifeline to those businesses which are struggling, and will help to provide extra financial relief. For more information about the RLS, please visit the British Business Bank website.