The Recovery Loan Scheme ends this month: could you apply for funding?

Jun 10, 2022

The deadline for applications to the recovery loan scheme (RLS) is fast approaching and you only have until the end of the month to make yours. 

The RLS is a UK Government scheme designed to help businesses deal with the impacts of the COVID-19 pandemic and its aftershocks. 

It replaced other COVID-19 business support packages that closed on 31 March 2021, including the bounce back loans scheme (BBLS) and coronavirus business interruption loan scheme (CBILS). 

Chancellor of the Exchequer Rishi Sunak announced the RLS in the March 2021 Budget, which made £75 billion of partially Government-backed loans available to businesses that had been adversely affected by the pandemic. 

It was meant to run until 31 December 2021 until Sunak extended its deadline to 30 June 2022.  

While this doesn’t give you much time to apply, you still can. Plus, you’ll be pleased to know there have been rumours of another RLS coming soon. 

But for now, what can you apply to the RLS in the final days of the scheme? 

What does the recovery loan scheme offer? 

Depending on which of the many lenders you can access the RLS with, you can secure your business with term loans, overdrafts, asset finance and invoice finance. 

The minimum amount term loans and overdrafts is £25,001, while the minimum you can get for asset and invoice finance is £1,000. The maximum amount of funding available through the RLS is £2 million. 

What are the terms of the lending agreement? 

Lenders get a guarantee from the Government that 70% of the amount they loaned will be returned if the borrower defaults on the repayments. As the borrower, you remain 100% liable for the debt, however.  

Unlike the previous schemes, there is no period during which businesses can pass up on making payments. So, from the outset, interest and fees need to be paid. 

The annual effective rate of interest and other fees by lenders cannot be more than 14.99%. 

Personal guarantees are not needed for facilities of £250,000 or less. Above this amount, the lender can take personal guarantees if they wish.  

However, the maximum amount that can be covered by the 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. 

Who can apply? 

To be eligible. Business must be trading in the UK and have been impacted by COVID-19. 

However, your business must still be viable, although the British Business Bank said lenders should “disregard any concerns over its short-to-medium term business performance due to the uncertainty and impact of COVID-19”. 

If you took out another COVID-19 loan, like a BBLS or CBILS facility, you are still allowed to apply for the RLS. 

To apply, get in contact with the lender you want to interact with. 

Are you certain the RLS is right for you? Before you take the plunge, don’t hesitate to ask what we think about the scheme.