A guide to the new Recovery Loan Scheme

The government has announced a new iteration of the Recovery Loan Scheme. Originally launched to support businesses during the coronavirus pandemic, it closed on 30 June. Here's how the new version of the scheme works.

Features of the Recovery Loan Scheme

Maximum lending: Businesses outside the scope of the Northern Ireland Protocol can borrow a maximum of £2m, while Northern Ireland Protocol borrowers can access up to £1m. Minimum facilities start at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Term length: The term length for loans and asset finance are available is between three months and six years, while overdrafts and invoice finance are available from three months up to three years.

Government guarantee: The government provides the lender with a 70% guarantee against the outstanding balance of the facility after it has completed its normal recovery process. The borrower always remains 100% liable for the debt.

Personal guarantees: Unlike the original Recovery Loan Scheme, lenders may ask for personal guarantees. Principal private residences cannot be taken as security within the scheme.

Borrowers via previous COVID-19 loan schemes: Businesses that secured funding through the government's previous coronavirus business lending schemes before 30 June 2022 are not prevented from accessing RLS after 1 August 2022, but it may reduce the maximum amount you are eligible for.

Recovery Loan Scheme eligibility criteria

Turnover: The scheme is open to businesses with a turnover of up to £45m (on a group basis, where part of a group).

UK-based: Borrowers must be trading in the UK. For most businesses that means generating more than 50% of income in the UK from trading activity.

No COVID-19 impact test: Unlike the previous iteration of the scheme, most borrowers are not required to confirm they have been affected by COVID-19.

Viability test: The lender will consider that the borrower has a viable business proposition but may disregard (at its discretion) any concerns over its short-to-medium term business performance due to the uncertainty and impact of COVID-19.

Business in difficulty: Those borrowing finance via RLS must not be a business in difficulty, including not being in relevant insolvency proceedings.

Subsidy limits: Borrowers need to provide written confirmation that receiving RLS funding will not mean that the business exceeds the maximum amount of subsidy they are allowed to receive.

How to access the Recovery Loan Scheme

Businesses can apply for funding through the Recovery Loan Scheme via accredited lenders. They include:

• Bank of Scotland

• Coventry & Warwickshire Reinvestment Trust

• Lloyds Bank

• NatWest

• Royal Bank of Scotland

The full list of accredited lenders is here.

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