The Recovery Loan Scheme, frequently referred to as RLS, was launched by the Government on the 6th April 2021 in order to assist businesses in sourcing finance as they look to recover and/or grow following the Covid 19 Pandemic. The funding can be used for any legitimate business purpose ranging from cashflow management to investment & growth and at present will run until the 31st December 2021. One of the main objectives of the RLS is to improve the terms offered to businesses.
Similar to the existing Government support initiatives, the Government will guarantee 80% of the loan to the lender however there are some key differences which we will focus on below:
Criteria for eligibility
In the same vein as the CBILs and BBILs schemes, the RLS scheme does have very clear eligibility criteria in place and the availability of funding will be subject to meeting this criteria and of course, the standard credit check process. Requirements for lenders are listed below:
- Must be a company trading in the UK
- Must be or would be considered viable were it not for the Covid 19 Pandemic
- Has been directly impacted by the Covid 19 Pandemic
- Is not in collective insolvency proceedings
A key point to note here is that a company can apply for the Recovery Loan Scheme if they have already received funding via the BBILs, CBILS or CLBILs schemes.
Products available & facility sizes
The Recovery loan scheme enables businesses of any size to receive a Government backed guarantee on facilities between £25,000 – £10,000,000. A diverse selection of products are available, including asset finance facilities and loans for up to 6 years and invoice finance funding for up to 3 years.
Key differences between RLS and CBILs, BBILs & CLBILs.
The first major difference is the interest and fees payable; the borrowers interest and fees will no longer be paid for by The British Business Bank for the first 12 months.
The second key difference is the size of loan; under the previous measures, businesses with a turnover of £45m or less could secure access to loans up to £5m and businesses with a turnover in excess of £45m could apply for funding up to £200m. With The Recovery Loan Scheme there will be no such turnover restrictions in place however the maximum loan amount will be capped at £10m.
Key features in depth
Further key features of the scheme are listed below:
- Up to £10m facility per business – As previously mentioned, the maximum amount of funding provided under RLS is £10m per business (with a maximum of £30m per group). In terms of minimum facilities, these vary from £1000 for invoice and asset finance and £25,001 for overdrafts and term loans.
- Length of term – In the case of asset finance and term loans, from 3 months up to 6 years. For invoice finance and overdraft facilities the terms range from 3 months up to 3 years.
- Personal Guarantees – Personal guarantees will not be required for facilities of £250,000 or less. In instances where the loan exceeds £250,000, the maximum amount that can be covered under the Recovery Loan Scheme is capped at 20% of the outstanding balance of the facility after the proceeds of business assets have been applied. Important to note here, no personal guarantees can be held over principle private residences.
- Turnover Limit – There is no turnover limit for businesses seeking funding through the scheme
- The lenders guarantee to encourage lending – The recovery loan scheme provides the lender with a Government backed guarantee against the outstanding balance of the facility. As the borrower, you will remain 100% liable for the debt.
- Interest and Fees – Businesses will be required to meet the cost of interest payments and any other associated fees pertaining to the Recovery Loan Scheme. The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.
We hope that brief and succinct round up of the key points of the Recovery Loan Scheme has answered some of the initial questions you may have.
As always, good luck with everything, and if we can help in any way we’re happy to do so.
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