The Recovery Loan Scheme is now live

The Chancellor announced that the British Business Bank will manage the Recovery Loan Scheme (RLS), which opened to applicants on 6 April 2021 and will run until 31 December 2021.

Various major banks (23 at last count) have already been accredited for this scheme – here is the full list

Finance is available for ANY business purpose, including cashflow, investment and growth strategies, provided the investment is made within the UK.

Eligibility for the RLS is not compromised by having previously accessed other forms of government backed lending and support (although other outstanding loans may affect the commercial decision to lend).

Key features:

• The RLS will cover the following types of finance:
– Term loans
– Overdrafts
– Invoice finance
– Asset finance

• Finance of up to £10m per business is available (and up to £30m per group), with loan being available from £25,000 to £10m and invoice and asset financing available from £1000.

• Finance terms are up to 6 years for term loans and asset finance facilities.  Overdrafts and invoice finance facilities will be up to 3 years.

• The scheme provides the lender with a government-backed partial (80%) guarantee against the outstanding facility balance with respect to loans under £250k, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.   For loans of over £250k the guarantee is capped at 20% of the outstanding balance after proceeds of business assets are applied.
• There is no turnover related restriction for businesses accessing the scheme.
• Note that the borrower always remains 100% liable for the debt.
• No personal guarantee will be required for loans up to £250k, however for loans exceeding this amount personal guarantees may apply at the discretion of the lender although they will never be applied to private residences.
• Aggregate of the annual effective rate of interest, upfront fees and other fees cannot exceed 14.99%.
• Capital repayment holidays are available with certain lenders where needed.

To be eligible a business must:

• Be trading in the UK (50% or more of all activities must be trading in nature)
• Be a viable business were it not for COVID-19 pandemic
• Be affected by the pandemic
• Not be involved in insolvency proceedings
• Present a viable business proposition

Ineligible businesses:
• Banks, financial institutions and insurers.
• Public sector bodies.
• State funded primary and secondary schools.

It is worth noting that decision making on whether you are eligible is delegated to the lender and if the lender can offer finance on normal commercial terms without the need to make use of the scheme they may do so. If rejected by one lender a business can apply to any other accredited lender.

In making an application you can expect to be required to provide:
• A business plan
• Management accounts
• At least 3 years of historic accounts
• Details of assets held
• Money laundering verification details

For further information please visit British Business Bank