The Recovery Loan Scheme (RLS) supports access to finance for UK businesses as they grow and recover from the disruption of the COVID-19 pandemic.

This scheme, backed by the government replaces the previous COVID-19 debt 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 closed to new applicants on 31 March 2021.

Is my business eligible?

The main difference between the Recovery Loan Scheme (RLS) and the coronavirus finance support schemes it replaces (BBLS, CBILS, CLBILS) is that 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

Three other important points to note:

• Lenders are required to undertake credit and fraud checks for all applicants to the Recovery Loan Scheme – the checks and approach may 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
• If a lender can offer finance on normal commercial terms without the need to make use of the scheme, they may do so

If I’ve had a Bounce Back Loan or already borrowed under CBILS or CLBILS, can I apply for the Recovery Loan Scheme?

Yes, your business can apply for finance under the Recovery Loan Scheme (RLS) even if you’ve borrowed under the other schemes. You might be able to borrow more under the RLS than you have already – though the maximum you can borrow will depend on your lender’s assessment and the scheme requirements.

How much can I borrow?

The amount your business can borrow under the Recovery Loan Scheme (note changes after 1 January 2022) depends on which type of finance you choose. There are two main types of finance:

• You can borrow from £25,001 to £10m (per business) for term loans and overdrafts
• You can borrow from £1,000 to £10m (per business) for invoice finance and asset finance.

What are the interest rates?

The good news is that interest rates for the Recovery Loan Scheme are capped at 15% (a lesson learned from the Bounce Back Loan Scheme). The interest rates will depend on the lender and on your business circumstances.

When do I need to pay the money back?

Term lengths depend on the type of finance (product) you choose. 

• 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.

How does the Recovery Loan Scheme differ from the schemes it replaces?

There are two important differences:

• Interest and fees – you’ll have to pay interest (and fees) from day one under the Recovery Loan Scheme because the British Business Bank will no longer pay your interest and fees for the first 12 months.
• Loan size – there is no turnover restriction under the Recovery Loan Scheme but the maximum loan amount is now capped at £10m. 

What is the government guarantee?

The Recovery Loan Scheme operates in a similar way to the existing support measures, with the government giving lenders an 80% guarantee (reducing to 70% after 1 January 2022). This means that if a business defaults on the loan, the lender can recoup 80% of the outstanding value of the loan from the government. This guarantee gives lenders confidence to lend to businesses. As the borrower, you are always 100% liable for the debt.

What can I use the funds for?

If your application is successful, you can use your Recovery Loan Scheme finance for any legitimate business purpose. Here are just a few examples:

• Managing cash flow
• Buying equipment
• Meeting a one-off cost
• Helping with payroll
• Investing in, for example, marketing
• Growing your business.

Important changes from 1 January 2022

At the Autumn Budget 2021, the Chancellor announced that the Recovery Loan Scheme would be extended until 30 June 2022.

From 1 January 2022, the following changes will come into force:

• The scheme will only be open to small and medium sized enterprises
• The maximum amount of finance available will be £2 million per business
• The guarantee coverage that the government will provide to lenders will be reduced to 70%

These changes will apply to all offers made from 1 January 2022.

At Breadalbane, we’ve been supporting UK SME’s throughout the pandemic with flexible funding options and we continue to do so as business owners look to refinance loans, improve cashflow, purchase additional assets or need a cash injection to help take advantage of their next business opportunity. 

We’re here to help put your growth plan into action. Contact us today.