On 20 July 2022 Business Secretary Kwasi Kwarteng announced that the Recovery Loan Scheme (RLS) will be extended for a further two years offering small businesses crucial support, while also accelerating economic growth in the UK.
Applications for the relaunched Recovery Loan Scheme (RLS) will run from August 2022 to the end of June 2024.
A statement from the British Business Bank on 12 July 2022 shared that to date over £4.5bn has been offered to small businesses across the UK by accredited lenders through this scheme.
Extending the Recovery Loan Scheme will continue to support SMEs while they navigate through the next phase of financial challenges prompted largely by inflation and the cost-of-living crisis.
What is the Recovery Loan Scheme (RLS)?
The Recovery Loan Scheme (RLS) is a government scheme supporting UK businesses who are looking to access finance as they recover and grow in the economy.
Initially announced in the March 2021 Spring Budget and launched in April 2021, the Recovery Loan Scheme has supported nearly 20,000 small businesses recovering from the Covid-19 pandemic and replaced two previous loan schemes: the Coronavirus Business Interruption Loan Scheme (CBILS), and the Bounce Back Loan Scheme (BBLS) which closed on 31 March 2021.
The previous RLS closed as of 30 June 2022, but with businesses facing increased financial pressures a two-year extension of the scheme was announced. While much of the application criteria and key features remain the same for this 'new iteration', there will also be some important amendments.
What are the key features of the Recovery Loan Scheme?
While the borrower is liable for 100% of the debt, the Recovery Loan Scheme provides lenders a 70% government-backed guarantee against any outstanding balance on loans and finance facilities. This means the lender can offer better terms to businesses needing financial help.
Under the RLS, businesses in the UK can apply for loans, overdrafts, invoice finance or asset finance facilities of up to £2 million with repayment terms between three months up to six years depending on the product, these were the same terms as the previous scheme.
The annual effect rate of interest, including fees, cannot exceed more than 14.99%.
There are three areas where borrowers and lenders will see some differences with the relaunched Recovery Loan Scheme:
- Businesses applying for loans and other facilities will no longer need to certify that they have been affected by the pandemic.
- Lenders will be responsible for certifying that under their standard commercial terms they would not be able to offer a facility to the applying business, or that if an offer was made it would be at a higher interest rate.
- Although not required, personal guarantees from the borrower will be permitted at the lender’s discretion; however, a principle private residence will be excluded as a possible form of security within the scheme.
Businesses will be able to apply for a wide range of products, depending on what lenders are offering, including:
- term loans
- overdrafts
- asset finance
- invoice finance
How can I use Recovery Loan Scheme funds?
The funds received through an approved application can be used for legitimate business purposes. This may include (but is not limited to):
Is my business eligible to apply for the Recovery Loan Scheme?
Businesses that previously applied for the Recovery Loan Scheme or Covid-19 support measures, such as the Coronavirus business loans schemes (CBILS and BBLS) or the Coronavirus Job Retention Scheme (CJRS), will be allowed to access the new RLS from August 2022, assuming they meet the schemes criteria.
The scheme is open to small businesses that:
- have a turnover up to £45m;
- are based and trading in the UK;
- pass the lender’s viability test which includes reviewing a business proposition; and
- can substantiate that they are not in difficulty or undergoing insolvency proceedings
How can I access the Recovery Loan Scheme?
Our team can put you in contact with applicable providers offering the Recovery Loan Scheme, or an alternative lender outside of the RLS that may be better suited to your borrowing needs.
You may also be required to provide lenders specific information such as your management accounts, asset details, business plan, and accounts history – we can help you prepare these documents too.
How can DSA help?
We have the experience and perspective to help our clients consider and apply for loans that will unlock their business’s full financial potential.
Whether you need help navigating the RLS or have questions regarding other financing options, we’ll help you find the right information and put you in touch with the right people.
Start your financing journey today by getting in touch!
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