Recovery Loan Scheme (RLS) – what is it and how does it work?

April 2021

Central Government backed Recovery Loan Scheme (RLS) is announced by the Chancellor – Rishi Sunak, which provides financial support to businesses across the UK as they aim to recover and grow following the coronavirus pandemic, this replaces the previous schemes that were available until 31st March 2021 such as the Bounce Back Loan, Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme (BBLS, CBILS, CLBILS).

The Recovery Loan Scheme is to help businesses of any size access loans and other kinds of finance so they can recover after the pandemic and transition period.

The RLS came into effect on the 6th April 2021, following the success of CBILS and with economic uncertainty still apparent, the RLS is intended to continue to stimulate economic recovery through growth and investment. Whilst it is provided to support growth, the RLS is provided at the discretion of the lender and lending criteria can apply.

What can you apply for?

  • Term loans or overdrafts of between £25,001 and £10 million per business.
  • Invoice or asset finance of between £1,000 and £10 million per business.

No personal guarantees will be taken on facilities up to £250,000. 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. A borrower’s principal private residence cannot be taken as security.

What is the term length?

The maximum length of the facility depends on the type of finance you apply for and will be:

  • up to 3 years for overdrafts and invoice finance facilities
  • up to 6 years for loans and asset finance facilities

What are the main features?

The key things that you need to know about Recovery Loan Scheme are:

  1. it is a partnership between the Government and a lender to facilitate lending to eligible UK businesses.
  2. the maximum lending under RLS, including any previous scheme facilities, is the lesser value of £10m or the borrower’s specific limit, the actual amount offered and the terms are at the discretion of participating lenders.
  3. it can be used to facilitate new lending and, to a limited extent, the refinance of existing debt.
  4. the scheme is open to SMEs and large enterprises, and (unlike CBILS for example) there is no minimum or maximum turnover restrictions.
  5. unlike the previous emergency lending support schemes, applicants to the RLS can have live facilities under those schemes (BBLS, CBILS, CLBILS) at the same time as an RLS facility (maximum limits apply).
  6. The government guarantees 80% of the finance to the lender. As the borrower, you are always 100% liable for the debt.  The scheme is open until 31 December 2021, subject to review.

Who’s eligible?

You can apply for the RLS if your business is trading in the United Kingdom

You will need to show the following regarding your business:

  • that it would be viable were it not for the pandemic
  • has been impacted by Covid-19
  • is carrying out trading activity in the UK
  • is not in collective insolvency proceedings (unless your business is in scope of the Northern Ireland Protocol in which case different eligibility rules may apply)

Who cannot apply

Businesses from any sector can apply, except:

  • banks, building societies, insurers and reinsurers (but not insurance brokers)
  • public-sector bodies
  • state-funded primary and secondary schools

How do I apply?

The Recovery Loan Scheme is now open for applications and the programme runs until 31st December 2021 subject to review.

RLS is a scheme which is intended to support many UK businesses that may not have otherwise been able to access critical funding. We currently know that it is only in place until the end of 2021, it is possible that it could be extended and continue in it’s existing format after the deadline date, or perhaps there may be some revisions made and a different offering could be approved in 2022. However, it could simply just finish all together at the end of 2021, nothing has been confirmed yet regarding any extension or revision at this point.

Email or call us now to discuss the scheme further.