HM Insights

What is the Recovery Loan Scheme?

The Recovery Loan Scheme ("RLS") launched on 6th April 2021 and replaced the preceding government-backed loan schemes (Coronavirus Business Interruption Loan Scheme ("CBILS"), the Coronavirus Large Business Interruption Loan Scheme ("CLBILS") and the Bounce Back Loan Scheme ("BBLS")) (applications for CBILS, CLBILS and BBLS closed on 31 March 2021)). The new scheme is to remain open to applications until 31st December 2021 (subject to review) and may provide a useful lifeline to businesses adjusting to the 'new normal'.  

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Similarities to CBILS

RLS is largely similar to CBILS, notably:

  • the Government will guarantee 80% of the losses incurred by the lender under any RLS facility;
  • the borrower will remain liable for 100% of the debt;
  • loans can be provided as term loans, overdrafts, asset finance and invoice finance facilities;
  • term loans or asset finance can be provided for up to 6 years;
  • overdrafts and invoice financing can be provided for up to 3 years; and
  • a borrower will not require to provide a personal guarantee in support of a loan less than £250,000.

The differences

Despite many similarities to the preceding government-backed schemes, there are some important differences:

  • borrowers who already have funding under CBILS, CLBILS or BBLS will not be precluded from obtaining funding under RLS (although this may impact the level of funding provided by any lender under the new scheme);
  • Annual turnover - there is no minimum or maximum annual turnover that an applicant has to meet to be eligible to apply for RLS;
  • Interest - the borrower is liable to pay interest on the loan at the outset. The Government previously covered the first year of interest.  There will be a cap on the interest rate at 14.99% but the rate is expected to be much lower than this;
  • Loan amount – for term loans and overdrafts, funding now starts at £25,001 rather than £50,001. Loans from £1,000 can be sought for invoice and asset finance;
  • Maximum loan amount – this has increased from £5 million (under CBILS) to £10 million; and
  • Upfront fees - the borrower will be responsible for the upfront fees charged by the lender (these were paid by the Government under BBLS and CBILS).

Eligibility 

To be eligible to apply for an RLS facility, a business would need to meet the following criteria:

  • be a UK based business of any size;
  • demonstrate that it is a viable business and that it has been impacted by the coronavirus pandemic; and
  • be an eligible business (banks, insurers (insurance brokers are eligible), public sector bodies or state funded primary or secondary schools are not eligible for RLS).

Get in touch

If you require any assistance in relation to the Recovery Loan Scheme, please get in touch with a member of our team.