Recovery Loan Scheme – the detail!

Coronavirus, Finance,

The Recovery Loan Scheme (RLS) was announced by Rishi Sunak as part of the Budget in Spring 2021. Set to run until December 2021, this replaces Coronavirus Business Interruption Loans (CBILS) and Bounce Back Loans (BBLS) which both ended on the 31st March 2021. The scheme was extended to end on the 30th June 2022 as part of the Autumn Budget 2021.

Key features of the scheme include:

  • Facilities starting from £1,000 for invoice finance and asset finance, and £25,001 for term loans and overdrafts. The maximum was reduced as part of the Autumn 2021 Budget to £2 million per business.
  • The government will provide guarantee coverage to lenders opt o 70% of the amount loaned.
  • Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years.
  • The level of maximum funding will be based on 25% of 2019 turnover, twice the company’s annual wage bill, or the loan is proportional to the business’ next 12/18 months liquidity requirements.
  • No Personal Guarantees can be taken on facilities up to £250,000, and borrower’s principal private residence cannot be taken as security.
  • No interest free period – businesses are required to meet the cost of interest payments and any fees associated with the facility.
  • Businesses which have taken out a CBILS, CLBILS or BBLS facility can still access the new scheme, although the maximum they can borrow depends on the lender’s assessment and scheme requirements.
  • Lenders will be required to undertake standard credit, fraud, AML and KYC checks for all applicants. When making their assessment, lenders may overlook concerns over short-term to medium-term performance owing to the pandemic. The checks and approach will vary between lenders.
  • A business has to be viable to lend to – they cannot be, at the time of application, subject to relevant insolvency proceedings.

A key aim of the RLS is to improve the terms on offer to borrowers, but if a lender can offer a borrower the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, the guidance around the scheme says they should do so. Of course, in line with normal lending, this may require a personal guarantee.

How can you access the Recovery Loan Scheme?

As was the case with Bounce Back Loans and the CBILS loans, it took a while for the lenders to complete the accreditation process, but you can now see list of all lenders in the British Business Bank website.

Find an accredited lender here.

You’ll see on the list that not every lender can provide every type of finance listed other page, so please do give the details some attention.

If you’re interested in finance through the scheme, the best starting point would be to speak to your own bank to start with as this will be where the most cost effective funds are available.

As always, please get in touch if you’d like to discuss your finance needs. We have contacts in the alternative finance market, and can help you prepare your cash flow forecasts , budgets and other information that may be helpful in any application.


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