Back in April 2021, the government launched the Recovery Loan Scheme (RLS). Originally designed to help businesses that were struggling because of the COVID-19 pandemic, it has since helped some 19,000 businesses with an average of £202,000 in support. Given the current pressures on the economy, this scheme was extended to 30 June 2024.
What is the Recovery Loan Scheme?
The Recovery Loan Scheme gives businesses access to funding as they invest and grow. Approved lenders can lend money to firms for any legitimate business purpose. The loans are 70% guaranteed by the government, while the scheme is managed by the British Business Bank.
Who can I borrow from?
According to the Institute of Chartered Accountants in England & Wales (ICAEW), there are currently five approved lenders. These are
- Bank of Scotland
- Royal Bank of Scotland
- Lloyds Bank
- Coventry & Warwickshire Reinvestment Trust
More lenders will be approved by the scheme in the near future.
What kinds of borrowing does the scheme support?
Term loans, overdrafts, asset finance and invoice finance are all supported. However, not all lenders will offer all these types of finance.
How much can I borrow?
You can borrow up to £2 million per business group (or £1 million if your business is in scope of the Northern Ireland protocol). Minimum borrowing depends on the type of finance you choose. Asset and invoice finance begin at £1,000, while loans and overdrafts start at £25,001.
How long do I have to repay a loan?
Loans and asset finance are available for terms between three months to six years. Overdrafts and invoice finance are available from three months to three years.
How much interest will I pay?
This will vary, depending on lender and finance type. However, the annual effective rate of interest plus fees cannot exceed 14.99%
Do I need to provide guarantees?
Lenders can take personal guarantees. However, you cannot use your main home as security.
What about the government guarantee?
Government guarantees 70% of any loan. That said, you remain 100% liable for the debt. Government will only repay the money after a lender has gone through its normal debt recovery process.
I’ve taken out other government loans. Can I still borrow from the RLS?
Yes. If you have taken out CBILS, CLBILS, BBLS loans or have borrowed via the original Recovery Loan Scheme, you can still apply for finance under the Recovery Loan Scheme extension. That said, you may find that these loans reduce the maximum amount available to you under the new RLS.
What are the eligibility criteria?
Eligibility criteria include:
- Turnover of £45 million or less
- Trading in the UK and (for most businesses) generating more than half of income from trading activity
- Passing a viability test (concerns about short- to medium-term business performance due to COVID-19 can be disregarded)
- Not being a business in difficulty. For example, firms in insolvency proceedings would not be eligible.
- Not exceeding public subsidy limits.
Unlike the previous iteration of the RLS scheme, the Recovery Loan Scheme extension does not require businesses to undertake a COVID-19 impact test. However, charities and Further Education colleges must still confirm they have been affected by the pandemic.
How do I apply under the Recovery Loan Scheme extension?
First you need to choose an accredited lender. You then approach the lender yourself and submit an application for their consideration. You will need to provide certain financial information, including management accounts and historic accounts. If you are a THP client and you need help in putting this information together, please speak to your account manager.
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.