Applications are now open for the £75bn Recovery Loan Scheme (RLS), the government’s latest covid-19 support programme, which provides financial support to businesses across the UK as they recover following the coronavirus pandemic.
The scheme opened for applications on 6 April 2021 and is available to businesses affected by the pandemic, including those who have already used existing loan schemes such as the Bounce Back Loan or Business Interruption Loan schemes.
The Recovery Loan Scheme has a funding pot of £75bn and will operate until 31 December 2021 and comes on top of various business grants available through local authorities to help companies through the initial phases of the end of lockdown.
The main stipulation is that the business must have been affected by Covid-19 and the finance can be used for any legitimate business purpose – including managing cashflow, investment and growth.
If a business has already borrowed from any of the other coronavirus loan schemes, the Recovery Loan Scheme is still available, although the amount borrowed under an existing scheme may in certain circumstances limit the amount available to borrow under RLS.
There is no turnover restriction for businesses accessing the scheme.
How does it work?
Lenders
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.
Accredited lenders include Bank of Scotland, Barclays, HSBC, NatWest, Lloyds Bank, Paragon, RBS, Santander, Skipton Business Finance, Yorkshire Bank and Clydesdale Bank.
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.
Types of finance
A lender can provide up to £10m as one of the following facilities:
- term loan;
- overdraft;
- invoice finance;
- asset finance; and
- guarantees.
RLS gives the lender a government-backed guarantee against the outstanding balance of the facility. Borrowers are 100% liable for the debt.
For loans of £250,000 or less, the lender will not take any form of personal guarantee.
For amounts over £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.
The scheme is capped at a total loan facility of £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 annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.
It is important to note that no personal guarantees can be held over principal private residences.
Lenders will be required to undertake standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders.
Applicants for finance will need to provide certain evidence to show they can afford to repay the RLS-backed facility. This is likely to include the following:
- management accounts;
- business plan;
- historic accounts; and
- details of assets.
AKEPB can assist interested members of our Jamat with an overview of their business plan, budgets and cash flow forecasts before their application for Recovery Loan Scheme is submitted. Contact details of AKEPB members can be found on IIUK app.
