Recovery Loan Scheme UK

The Recovery Loan Scheme was designed to help SMEs recover and grow as the UK begins its post-pandemic economic recovery. On 20 July 2022, the Government announced the latest iteration of the Recovery Loan Scheme (RLS), which is set to run from 1 August 2022 until 30 June 2023. However, the scheme has only launched with a small number of lenders and it is therefore not available to most customers right now. 

Going forward, lenders must attempt to underwrite any finance application with their own market-based lending product before an RLS loan can be considered. Additionally, lenders will primarily use the Recovery Loan Scheme to fund businesses that they previously couldn't. This could be due to factors such as their credit score, trading time, turnover or homeowner status. Hence, if you're considered a less risky business, in most cases lenders will first look to support you using their standard product selection instead of RLS. 

Any finance received can be used for any business purpose. For example, hiring new staff, boosting cash flow, buying more stock to meet an unexpected increase in demand and investing in new equipment.

You can only access RLS finance through lenders that have been accredited by the British Business Bank.

The third RLS version will continue to provide support to businesses, but there are some key differences to keep in mind.

Business Secretary Kwasi Kwarteng confirmed recently that businesses won’t need to certify that they’ve been impacted by the Covid-19 pandemic to be eligible. 

Lenders, however, must certify that they wouldn’t have been able to provide finance to the business under normal commercial terms – or albeit only with high interest rates. In this sense, the RLS will act as an extension of lenders’ standard product range. 

The new Recovery Loan Scheme at a glance:

• Available to SMEs only with a turnover cap of £45M

• Government guarantee for lenders is 70%

• Personal guarantees are at the lender’s discretion, however, they are almost certain to be taken by lenders

• Delivered through four finance types

• Term loans (£25,001–£2 million, up to 6 years)

• Overdrafts (£25,001–£2 million, up to 3 years)

• Invoice finance (£1,000–£2 million, up to 3 years)

• Asset finance (£1,000–£2 million, up to 6 years)

Are you eligible for RLS funding?

Lenders must look to support businesses under their standard products first. (Therefore, if you qualify for a lender's standard product, you will not be offered an RLS loan). Failing that, they can use the RLS Government Guarantee to provide additional security to enable them to lend.

Much like the old Enterprise Finance Guarantee Scheme (EFG), the new RLS allows lenders to support businesses they previously couldn’t due to their credit score, trading time or homeowner status. The extending Recovery Loan Scheme is available to SMEs only with a turnover cap of £45M. It is aimed at borrowers who do not qualify for standard lending products due to credit score, trading time or homeowner status. 

The following businesses can’t apply: banks, building societies, insurers and reinsurers (excluding insurance brokers); public-sector bodies and state-funded schools.

How does the Recovery Loan Scheme work?

The government will guarantee 70% of the lender’s liabilities and the maximum funding amount still stands at £2 million. 

Previously, personal guarantees (PGs) were permitted only for facilities above £250,000. This time around, PGs will be permitted for facilities under £250,000 too. PGs are at the lender’s discretion, however, it’s likely that they will be required. This brings the scheme in line with the standard commercial practice in business lending. 

Principal private residences may not be used as security under any circumstances.

Is RLS the best option for me?

In many cases, alternative lending products offer more choice and control compared with RLS. Businesses may be able to borrow more than they would through the scheme, and might also benefit from better interest rates. What’s more, there’s a much broader selection of non-RLS product choices out there to choose from. In most cases, an RLS loan will take longer to get, this is due to lenders prioritising their standard product applications ahead of RLS applications. 

What is the interest rate on the Recovery Loan Scheme?

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

The annual effective rate of interest and upfront fees cannot exceed 14.99%.

Documentation

When you apply for RLS finance, the lender will request evidence to show that you can afford to pay it back. It's likely that a lender will ask to see the following documents.

• Management accounts

• Filed accounts

• 6 months of bank statements

Please be advised that any documentation required can vary from lender to lender.

The lenders must also carry out standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. The decision as to whether your business is eligible or not lies with the lender, who may overlook concerns over short-to-medium term performance caused by the pandemic.

Based on the information you provide, we’ll compare 120+ lenders and match your business with the right finance options for its needs. Start your funding journey now.

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What types of funding options are available now and what are their benefits?

• Unsecured term loans are perfect for businesses that don’t have assets to offer for security but need funding quickly. With lenders on the market providing loans up to £15m, there are many options available. Apply now.

• A Revolving credit facility is a highly flexible funding solution that allows you to withdraw money, use it to fund your business, repay it and withdraw it again. Apply now.

• Merchant Cash Advances are a highly innovative finance product. The lender provides a cash advance which is repaid as a percentage of card terminal takings. Apply now.

• Asset finance is a convenient way of borrowing money using a company's balance sheet assets (inventory, accounts receivable) as security to take out a loan. Apply now.

• Invoice finance is a way of borrowing money based on what your customers owe to your business. It eliminates payment delays and safeguards your cash flow. Apply now.

Use Funding Options to apply

You can apply for a range of alternative finance options through the Funding Options platform. We’ve been chosen by the British Business Bank as a platform to find both RLS and non-RLS finance for UK businesses. Just tell us how much funding you require and what it's for, and we’ll ask for some basic information about your business. 

Based on the information you provide, we’ll compare 120+ lenders and match your business with the right finance options for its needs. Start your funding journey now.

Apply today