Everything you need to know about the Recovery Loan Scheme

10 Mar 2021

Rishi Sunak recently unveiled an investment-led budget designed to provide SMEs with financial support throughout the pandemic and beyond. The Recovery Loan Scheme is one of many measures set to enable UK businesses to prosper and grow.

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The Recovery Loan Scheme launched on 6 April 2021, at the beginning of the new financial year. It replaces the BBLS, CBILS and CLBILS to ensure businesses can continue to access the finance they need to recover and grow following the lockdown.

The RLS is set to finish on 31 December 2021, subject to review.

Businesses of any size can apply for up to £10M in finance (or £30M for groups with subsidiaries). RLS finance can be used for any business purpose, including to boost cash flow and fund growth plans during the next phase of the country’s economic recovery. 

 Recovery Loan Scheme

The Recovery Loan Scheme was announced in the Government’s 2021 budget.

The Recovery Loan Scheme was announced in the Government’s 2021 budget.

To help support more lending to SMEs, the government will provide an 80% guarantee to the lender. Let’s run through what else we know about the new scheme so far...

What type of finance is available through the Recovery Loan Scheme?

As with CBILS, you can apply for a term loan, overdraft, invoice finance or asset finance. 

For term loans and overdrafts, between £25,001 and £10 million per business is available. Between £1,000 and £10 million per business is available for invoice finance (which allows you to unlock cash from your invoices) and asset finance (which enables you to spread the cost of an asset purchase). 

The type of facility you apply for will depend on your needs and circumstances. You can check out our knowledge pages on invoice finance, asset finance, business loans and overdrafts to help you decide which is most suitable for your business' needs.

For overdrafts and invoice finance facilities, terms will be up to three years. Finance terms are up to six years for term loans and asset finance facilities. 

Who’s eligible for a Recovery Loan?

There’s no turnover restriction for businesses accessing the Recovery Loan Scheme, so businesses of any size can apply. This differs from CBILS, where only businesses with annual turnover of no more than £45 million can apply.

To be eligible for the Recovery Loan Scheme, your business must:

  • trade in the UK

And you’ll need to show that your business:

  • is viable or would be viable were it not for the pandemic

  • has been impacted by the coronavirus pandemic

  • isn’t in collective insolvency proceedings (more details to follow)

Businesses operating in any sector can apply, apart from banks, building societies, insurers and reinsurers (with the exception of insurance brokers), public-sector bodies, state-funded schools (both primary and secondary). 

Will I need to offer a personal guarantee?

You won’t be required to provide a personal guarantee when you take out a finance facility of up to £250,000. For finance over £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. 

Your principal private residence (PPR) can't be taken as security.

Can I get a Recovery Loan if I’ve taken out a CBILS facility?

Yes, you’ll be able to access the scheme even if you’ve taken out a CBILS, CLBILS or BBLS facility. Bear in mind that the maximum amount you can borrow depends on the lender’s assessment together with the requirements of the scheme.  

Do I have to pay interest and fees?

Yes. Unlike CBILS, where the Government makes a Business Interruption Payment (BIP) to cover the first 12 months of interest payments and any lender-levied charges, you’ll have to pay any interest and fees from the outset.

Interest rates and fees will differ, however the Government has capped fees at 14.99% on an annual effective rate basis (interest, broker fees, other fees).

Upfront fees are capped at 5%.

What checks will the lender carry out?

You can expect the lender to carry out a credit check and fraud checks when you submit an application. The specifics of the checks will depend on the individual lender’s approach. If you’ve experienced short-to-medium term business performance issues due to the pandemic, the lender may overlook them. 

Which lenders are on the panel?

The RLS is available from a growing number of lenders that are accredited by the British Business Bank and listed on their website. Lenders include both well-known high street bank brands and alternative/specialist lenders.

What documentation will I need to provide?

The decision as to whether you're eligible or not lies solely with the lender. Therefore, they will require evidence that shows you can afford to pay back the RLS-backed finance.

You'll probably be asked for:

  • Management accounts

  • Business plan

  • Historic accounts

  • Details of assets

Aside from the RLS, is there any other support?

In the 2021 budget, an additional £65bn of measures were announced to help businesses during the period of transition. These include a business rates holiday extension, VAT reduction, £5bn grant for retail, hospitality and leisure – and many more. 

Although one of the aims of the Recovery Loan Scheme is to improve the terms on offer to UK businesses, you might be eligible for a commercial loan on even better terms. As well as the RLS, there are a number of alternative finance options out there that have been designed with SME flexibility and accessibility in mind.

See what your business could be eligible for today. 

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Stuart Lawson

Chief Commercial Officer

Stuart is Chief Commercial Officer at Funding Options where he plays a key role in driving the growth of the business and its relationships with more than 120 partners. A finance industry veteran, he has a strong background in alternative finance, corporate and commercial banking, as well as global transaction banking.

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