COVID-19 Update – 6 April – Recovery Loan Scheme (RLS)

Announced at the Budget in March, the Recovery Loan Scheme provides finance for UK businesses to support recovery and growth following the pandemic.

Businesses can apply for the scheme to finance any legitimate business purpose, from managing cashflow to making an investment for growth, as long as the business has been affected by COIVD-19. The business must be able to afford to take out additional debt finance for these purposes.

What is the Recovery Loan Scheme?

The scheme supports borrowing of up to £10m for individual businesses and up to £30m across a group and has the option to choose from term loans, overdrafts, asset finance and invoice finance.

The term length will be dependent on which option is selected, with term loans and asset finance facilities available from three months to six years and overdrafts and invoice finance available from three months to three years.

The interest and fees associated with the RLS facility have to be paid from the outset and the annual effective rate of interest including the upfront and any other fees cannot be more than 14.99%. Of course, a business may be able to agree a rate lower than this.

It is possible to access this funding if a business has already taken out a CBILS, CLBILS or BBLS facility, however it may limit the amount that can be borrowed under this scheme.

Personal guarantees are not permitted for facilities of £250,000 or less. 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. No personal guarantees can be held over Principal Private Residences.

The borrower always remains 100% liable for the debt but the scheme provides the lender with a government-backed guarantee against the outstanding balance of the facility.

Am I eligible for the Recovery Loan Scheme?

To be eligible for the scheme the following must apply:

• The business has been impacted by COVID-19
• It trades in the UK
• There is a viable business proposition
• The business can pass credit and fraud checks

How do I apply for the Recovery Loan Scheme?

The RLS will be available through a number of accredited lenders and you should approach your own finance provider first to see if you can get access to this funding. You may also consider approaching other lenders if your finance provider is unable to access the finance you need.

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