Applications are now open for the £75bn Recovery Loan Scheme (RLS). The scheme opened for applications on 6 April 2021 and is available to businesses affected by the pandemic, including those who have already used existing loan schemes such as the Bounce Back Loan or Business Interruption Loan schemes. The scheme will operate until 31 December 2021.
The main stipulation is that the business must have been affected by Covid-19 and the finance can be used for any legitimate business purpose – including working capital, investment and growth.
If a business has already borrowed from any of the other coronavirus loan schemes, the RLS is still available, although the amount borrowed under an existing scheme may in certain circumstances limit the amount available to borrow under RLS.
There is no turnover restriction for businesses accessing the scheme.
The RLS will initially be available through a number of lenders accredited by the British Business Bank. New lenders under the scheme will be listed on the British Business Bank website as they become accredited.
Accredited lenders include Bank of Scotland, Barclays, HSBC, NatWest, Lloyds Bank, Paragon, RBS, Santander, Skipton Business Finance, Yorkshire Bank and Clydesdale Bank.
Types of finance
A lender can provide up to £10m as one of the following facilities:
- term loan;
- invoice finance;
- asset finance; and
RLS gives the lender a government-backed guarantee against the outstanding balance of the facility. Borrowers remain 100% liable for the debt.
For loans of £250,000 or less, the lender will not take any form of personal guarantee.
For amounts over £250,000, the lender has the discretion to decide whether to take personal guarantees. However, 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.
The scheme is capped at a total loan facility of £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.
It is important to note that no personal guarantees can be held over principal private residences.
Applicants for finance will need to provide certain evidence to show they can afford to repay the RLS-backed facility. This is likely to include the following:
- management accounts;
- business plan;
- historic accounts; and
- details of assets.