The recovery loan scheme (RLS) has opened to applications from today.
The scheme, which was announced by Chancellor Rishi Sunak in his March 2021 Budget, aims to support smaller businesses with additional finance to manage cashflow, growth and investment as they steer a path towards a sustainable recovery.
The new programme is scheduled to run until 31 December 2021, subject to review and replaces the coronavirus business interruption loan scheme (CBILS), bounce back loan scheme (BBLS) and coronavirus large business interruption loan scheme (CLBILS) which all ended on 31 March.
The maximum amount of a facility provided under the scheme is £10m per business and £30m per group. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Businesses can choose from term loans, overdrafts, asset finance and invoice finance, subject to the lender being accredited for each of these finance types.
Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years.
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 a previous scheme may in certain circumstances limit the amount they may borrow under RLS.
Interest and fees will be paid by the business from the outset and the annual effective rate of interest and upfront and other fees cannot be more than 14.99 per cent.
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 per cent 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.
RLS-backed facilities are provided at the discretion of the lender.
To apply for an RLS loan the borrower must confirm to the lender that it has been impacted by Covid-19 and is trading in the UK. In the first instance, businesses should approach their own finance provider, ideally via the lender’s website.
They may also consider approaching other lenders if they are unable to access the finance they need. There is no turnover restriction for businesses accessing the scheme.
The lender will consider that the borrower has a viable business proposition but may disregard any concerns over its short-to-medium term business performance due to the uncertainty and impact of Covid-19.
Lenders are required to undertake credit and fraud checks for all applicants, as well as customary checks such as know your customer and anti-money laundering. The checks and approach may vary between lenders.
The British Business Bank has previously invited lenders accredited under CBILS to apply for accreditation under the RLS. The bank said once accredited lenders under the scheme will be listed on its website and it expects to add many more over the coming weeks.
The British Business Bank said 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, they should do so.