The Recovery Loan Scheme (RLS) is supported by the UK Government and aims to help businesses of any size as they recover from the Coronavirus pandemic with loans between £25,000 and £10M. The RLS replaces the existing debt-based schemes – the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS), all of which close to new applicants on March 31st 2021.
When does the Recovery Loan Scheme Start & Finish?
The Recovery Loan Scheme is due to launch on the 6th April 2021 and scheduled to close on the 31st December 2021. This date my be subject to review. Different lenders may launch their offering at different times.
Is My Business Eligible to Apply?
UK businesses of any size can apply for a loan or overdraft. This is one of the main difference between the Recovery Loan Scheme and the previous coronavirus finance support schemes it replaces (BBLS, CBILS, CLBILS). With the RLS there are no restrictions on turnover.
Your business must however meet certain criteria in order to access the scheme. Specifically, your business must:
- Be a UK trading company
- Be viable (or would be viable were it not for the pandemic)
- Have been impacted by the coronavirus pandemic
- Not be in collective insolvency proceedings.
Other things to note:
- Lenders are required to undertake credit and fraud checks for all applicants to the Recovery Loan Scheme – the checks and approach may / will vary between lenders.
- Lenders will not take personal guarantees on facilities up to £250,000, and lenders cannot take a borrower’s principal private residence as security.
Who cannot apply?
Businesses from any sector will be eligible to apply, except:
- banks, building societies, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- state-funded primary and secondary schools
I Have Already Received a Bounce Back Loan Or a CBILS / CLBILS loan. Can I Apply For The Recovery Loan Scheme?
In one word – yes. Having borrowing under BBLS, CBILS or CLBILS does not prevent you from obtaining support under RLS. The maximum you will be able to borrow will be based on the lender’s assessment of your affordability to repay any additional borrowing and the scheme’s requirements.
How Much Can I Borrow?
This depends on the type of finance you require under the Recovery Loan Scheme. There are two main categories:-
- You can borrow from £25K to £10M (per business) for overdrafts & term loans.
- You can borrow from £1K to £10M (per business) for Asset Finance & Invoice Finance.
Please note that each lender will set their own parameters within the scheme and may only offer higher minimum loans than those stated above and / or cap loan below the scheme maximum. How much you can borrow will be based on the lenders assessment of what your business can afford.
How Long Do I Get To Repay What I Borrow?
Again, this depends on the product type:-
- You can borrow for up to six years for term loans and asset finance facilities.
- You can borrow for up to three years for overdrafts and invoice finance facilities.
The Previous Loan Schemes Offered An Interest-Free Period. Does This Apply Under The Recovery Loan Scheme? Are There Any Other Differences?
The RSL is different to the other Coronavirus Loan Schemes in a few ways:-
- Interest & Fees – you will have to pay any lender interest & fees from day one under the Recovery Loan Scheme. The Government / British Business Bank will no longer cover fees & interest for a period of 12 months.
- Loan Size – loans are not directly restricted by business turnover under the Recovery Loan Scheme but the maximum loan is now capped at £10M
- Repayments – Your repayments are likely to commence one month after loan completion although this will be determined by individual lenders.
Is the Government Providing a Guarantee?
Yes – The Recovery Loan Scheme will operate in a similar way to the previous CBILS scheme. The Government will provide the lenders with an 80% guarantee. This means that if a business defaults on the loan and fails to repay, the lender can recoup 80% of the outstanding loan balance from the Government.
What Sort Of Credit Assessment Will Lenders Carry Out?
How lenders assess applications under the Recovery Loan Scheme will be guided by the scheme rules and the lender’s own credit policy. All lenders will be required to undertake credit and fraud checks for all applicants. This may include all Director and / or Shareholders. When making their assessment, lenders may overlook concerns over short term to medium term performance owing to the pandemic. The checks and approach taken will vary from lender to lender. You will likely need to supply financial accounts to support your applicant along with historic bank statements. Management Accounts or Management MI may be required on a case by case basis, as might cash flow projections and or a Business Plan. This will vary lender to lender and will also will be determined by how long your business has traded.
How Do I Apply For Support Under The Recovery Loan Scheme?
You can approach a lender directly if they accept applications in that way. A list of lenders is available on the British Business Bank website. Lochend Finance is very experienced in obtaining finance on behalf of businesses and was very successful in helping businesses to obtain CBILS loans under the previous schemes. Please take a look at our “Deals Completed” page for more information. We would be happy to progress an application for you with an accredited lender on your behalf. Why use Lochend Finance?
- We are independent.
- We are authorised and regulated by the FCA.
- We are not tied to any one lender.
- We are members of the NACFB – National Association of Commercial Finance Brokers – Home – NACFB.
- We are members of FIBA – Financial Intermediary & Broker Association – Home – FIBA.
- We act for YOU, not the lender.
- We aim to get you the best possible deal in terms of loan amount, price & conditions.
- We remove the stress and hassle out of arranging finance for you.