About the scheme
Launched on 6 April 2021, the Recovery Loan Scheme (RLS) provides financial support to businesses across the UK as they recover and grow following the coronavirus pandemic.
You can apply to the scheme if Covid-19 has affected your business. You can use the finance for any legitimate business purpose – including managing cashflow, investment and growth. However, you must be able to afford to take out additional debt finance for these purposes.
If your business has already borrowed from any of the other coronavirus loan schemes – namely:
- the Bounce Back Loan Scheme (BBLS)
- the Coronavirus Business Interruption Loan Scheme (CBILS)
- the Coronavirus Large Business Interruption Loan Scheme (CLBILS)
RLS is still open to you, although the amount you have borrowed under an existing scheme may in certain circumstances limit the amount you may borrow under RLS.
RLS will run until 31 December 2021, subject to review.
How it works
The Recovery Loan Scheme will initially 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.
Please note: A key aim of the Recovery Loan Scheme is to improve the terms on offer to you, 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.
When looking to borrow, you should first approach your own finance provider – ideally via its website. You may also consider approaching other lenders if you’re unable to access the finance you need.
high-street banks
challenger banks
asset-based lenders
smaller specialist local lenders
How much can you borrow?
A lender can provide up to £10 million as one of the following facilities:
term loans
asset finance
overdrafts
invoice 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 decide whether 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.
Qualifying criteria
- UK-based business that’s been impacted by Coronavirus (Covid-19)
- Less than 250 Employees (if part of a group of companies)
- Turnover less than £45m, and/or annual balance sheet total not exceeding £38.75m
- 2 years trading history
- Mainly UK trading activity and over 50% of turnover from trading activity (e.g not from investments)
- Loan is for business purposes including working capital / growth or investment
- Maximum loan amount is up to 25% of 2019 turnover, including outstanding amounts owed through CBILS/CLBILS/RLS (excluding BBLS)
Key features of the scheme
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.
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.
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%.
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 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.
There is no turnover restriction for businesses accessing the scheme.
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.
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