The long-awaited Recovery Loan Scheme finally launched this week, after the chancellor revealed it would be replacing both the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS) during last month’s Budget.
Similarly to the other government coronavirus loan schemes, the Recovery Loan Scheme (RLS) will provide financial support to the many businesses across the UK that have struggled through the pandemic.
If your business has been affected by Covid-19, you can apply for finance via the Recovery Loan Scheme and use the money for any business purpose. Whether that’s to enable growth after a challenging year, manage cash flow or buy much-needed stock, as long as it’s a legitimate business requirement, you can use the money however you see fit.
RLS is planned to run until 31st December 2021, but this could change.
One Scheme, But Plenty of Choice
RLS will help thousands of businesses access funding and this may not have been possible without the government-backed guarantee. After a tumultuous year, lenders could have been wary about lending to businesses that have faced financial difficulties over the last 12 months and the criteria that typically determine eligibility has become redundant due to widespread business closures during the three UK lockdowns.
RLS provides the lender with a government-backed guarantee against the loan facility, though of course, as the borrower, you are 1000% liable for the debt. But this time round businesses can access a wide range of funding products through the accredited lenders on the scheme and can borrow up to £10m. The types of finance currently available through RLS are:
Just like before with the previous government coronavirus schemes, RLS will initially be available via a smaller batch of lenders that are accredited by the British Business Bank. However, this list will steadily grow, and new lenders will continue to be accredited. Click here to view the up-to-date list of accredited lenders – remember that not every lender will be able to provide every type of finance listed in the scheme – if you have a funding product in mind, simply filter by the financial variant you require.
For those businesses accessing invoice and asset finance, the minimum funding amount is £1000. For businesses interested in term loans and overdrafts, the minimum funding amount is £25,001. Whilst up to £10m is available for each business, the total sum of money offered is at the discretion of the lender of which you choose.
The terms vary in length, depending on which type of finance you apply for. For invoice finance and overdrafts, the terms can last up to three years. For term loans and asset finance facilities, it’s up to six years.
Some Important Things to Take Note Of…
Under the Recovery Loan Scheme, lenders are not permitted to take any form of personal guarantee for facilities of £250,000 or less. The government will provide your lender with an 80% guarantee of the finance it provides, but you are liable for the entire loan amount and must be able to afford to take out additional debt, regardless of hardship caused by the pandemic.
Additionally, if you decide to borrow more than £250,000, any accredited lender can choose to take a personal guarantee. However, no personal guarantees can be held over Principal Private Residences.
Unlike CBILS and BBLS, money borrowed through the Restart Loan Scheme will be lent on normal commercial banking terms, meaning you will be expected to start repaying the loan as well as any fees associated with the facility straight away.
It’s also worth remembering that your business can still choose from the standard commercial loans available and if a lender can offer a funding facility that is better for you without requiring the guarantee provided by the RLS, the lender should do so. It’s expected that accredited lenders will charge a premium to their usual rates, as for many RLS facilities, lenders will be relying entirely on the Government guarantee as their security. That being said, the annual interest rate, upfront and other fees cannot exceed 14.99%.
If one accredited lender turns you down, your business can still approach other lenders within the scheme and if your business has already utilised a CBILS, BBLS or CLBILS facility, you’ll still be able to access RLS, though it could potentially limit the amount you can borrow.
How can you apply for the Recovery Loan Scheme?
It’s really simple! You can apply directly through your chosen lender. Browse through the accredited lenders displayed on the British Business Bank’s website, fill out an application (or approach them for more information) and await your decision.
Equally, you can access the RLS through plenty of trusted brokers. If you prefer to hand off the stress to an expert who can advise you on which lenders and products best suit your needs, do so!
To be eligible, your business will need to confirm that it has been impacted by Covid-19, be carrying out trading activity in the UK and have a viable business proposition – your chosen lender can disregard any concerns over short to medium term business performance due to the uncertainty and impact caused by the Coronavirus.
For more SME advice and tips, read our related posts below. If you are experiencing cash flow challenges or want to realise your business growth plans, get in touch with our team of Funding Specialists today on 020 7839 9451 or email [email protected].