The Recovery Loan Scheme is now open

The Recovery Loan Scheme (RLS) opened on 6 April 2021.  This is a scheme backed by the UK Government which aims to provide further support for businesses affected by the Covid-19 pandemic.

The scheme is open to a wide range of businesses and is operated in conjunction with the usual lenders.  Loans of up to £10m will be available to eligible businesses.

Who is eligible?

The scheme is open to:

• Sole traders
• Partnerships
• Limited companies
• Limited partnerships
• LLPs
• Co-operatives and community benefit societies
• Charities and further education establishments
• Any other type of entity carrying out a business activity in the UK, provided that more than 50% of its turnover is generated from trading activity in the UK.

Applicants must self-certify that they have been adversely affected by the Covid-19 pandemic.

Support under the RLS is available to businesses which have not previously received support under a Covid-19 related scheme and is also available to those which have previously received support under the earlier Bounce Back loan and Coronavirus Business Interruption Loan schemes, which have now closed.

What kinds of support are available?

A variety of facilities are available under the scheme:

• Term loans
• Overdrafts
• Invoice finance
• Asset finance

Applicants may apply for more than one type of assistance under the scheme.

How much support is available?

The minimum facilities available under the scheme are £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts.

The maximum amount is £10 million.

Repayment terms are up to six years (for term loans and asset finance) and up to three years (for overdrafts and invoice finance).

Capital repayment holidays and/or interest free periods may be available, but these are not an integral feature of the scheme and are entirely at the discretion of lenders.

Facilities are available subject to the usual lending criteria.  Security may be required and personal guarantees may be required for amounts over £250,000.  Government support consists of a guarantee against 80% of the amount borrowed: the purpose of this is to improve availability and affordability of the finance facilities, so that these facilities may be more widely available than would be the case if there was no Government backing.  The borrower nevertheless remains liable for 100% of the amount borrowed.  The annual effective interest rate for borrowings under the scheme cannot be more than 14.99%

The specific terms of borrowings depend on each individual lender and the availability of the support is entirely at the discretion of the lender.  Applicants will go through the lender’s usual borrowing process, which will include standard credit and fraud checks, and lenders will ask for information to support the application and demonstrate that the repayments are affordable.  Required information will typically include:

• A business plan
• Management accounts
• Historic accounts
• Details of assets held by the business.

How do I apply?

Applications must be made through accredited lenders.  All of the major UK banks are participating in the scheme at the time of commencement and it is expected that additional lenders will be added as time goes on.  You do not need to be an existing customer of a lender before approaching that lender under the scheme.  The scheme will be open until 31 December 2021.

The RLS is administered by the British Business Bank and further information is available at their website:

https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/

This includes FAQs for applicants:

https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/faqs/

and a list of participating lenders, which will be updated as additional lenders join the scheme:

https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/current-accredited-lenders/

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Glen Carrie on Unsplash