Posted: Mon 6th Jun 2022
The Recovery Loan Scheme (RLS) is the UK government's scheme to help businesses deal with the impact of coronavirus.
RLS replaced the following schemes which closed on 31 March 2021:
Bounce Back Loans Scheme (BBLS)
Coronavirus Business Interruption Loan Scheme (CBILS)
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
Originally announced by chancellor Rishi Sunak in the March 2021 Budget, the £75bn Recovery Loan Scheme was due to run until 31 December 2021, but in the November 2021 Budget, he said it has been extended until 30 June 2022.
According to the Financial Times, the government is planning to introduce a new £3bn-a-year business loan scheme once the Recovery Loan Scheme ends.
The newspaper says the new scheme will be backed by a 70% guarantee. However, unlike the other schemes, applicants will need to put up a personal guarantee.
Depending on the lender, UK businesses can access term loans, overdrafts, asset finance and invoice finance.
The minimum amount for term loans and overdrafts is £25,001 and for asset and invoice finance, a minimum £1,000 is available.
The maximum amount of funding available through the Recovery Loan Scheme is £10m.
Lenders receive a government-backed guarantee but the borrower always remains 100% liable for the debt.
Unlike the previous schemes, there is no period during which businesses do not have to make repayments. For funding through the Recovery Loan Scheme, interest and fees need to be paid by the business from the outset.
The annual effective rate of interest and other fees by lenders cannot be more than 14.99%.
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.
Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years.
Businesses must be trading in the UK.
Business owners must confirm to the lender that they have been impacted by COVID-19.
Borrowers need to show their business is viable, although the British Business Bank said lenders "may disregard any concerns over its short-to-medium term business performance due to the uncertainty and impact of COVID-19".
Businesses must not be in collective insolvency proceedings.
The lender will make credit and fraud checks on all applicants as as customary checks such as 'know your customer' and anti-money laundering. The British Business Bank said the "checks and approach may vary between lenders".
There are no turnover restrictions for businesses accessing the scheme.
Businesses that have taken out a BBLS, CBILS or CLBILS facility are able to access the new scheme, although the amount they have borrowed under a previous scheme may limit the amount they can borrow under RLS.
Funding is provided at the discretion of the lender.
You need to apply directly with a lender. The British Business Bank said it has invited all lenders accredited for CBILS to appy to be accredited for RLS.
The latest accredited RLS lenders are published here.
The scheme was originally due to run until 31 December 2021 but in the 2021 Autumn Budget, the chancellor announced it has been extended until 30 June 2022.
When you apply for finance, you'll need to provide evidence to show that you can afford the repayments. Evidence is likely to include the following:
Details of assets
"Business owners have worked hard to survive and, in some cases, grow, against an extremely difficult economic backdrop," said Helen Bierton, Starling Bank’s chief banking officer. "As the economy starts to rebound, many will need additional help to support their recovery, investment and growth. Starling will be here with RLS lending to help with that.”
To find out more, visit Starling Bank's website.
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