Coronavirus update: Applications for CBILS loans have now closed.
Our lenders are now accredited for the government’s new Recovery Loan Scheme.
In the Autumn budget update, Chancellor Rishi Sunak confirmed the extension of the Recovery Loan Scheme (RLS) in the Treasury's Autumn Budget. The RLS will run until 30 June 2022.
Recovery Loan Scheme at a glance:
Launched on 6 April and ends on 30th June 2022.
Available to SMEs only with a turnover cap of £45M
Guarantee coverage that the government provides to lenders is 70%
No personal guarantees for loans up to £250k
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)
Announced in the Chancellor’s 2021 Budget, the Recovery Loan Scheme is a follow-up to the CBILS and BBLS schemes which will ended on 31 March 2021. This new scheme is designed to help businesses manage cash flow, investment and growth post-lockdown.
The finance can be used for any business purpose. Hiring new staff, boosting cash flow, buying more stock to meet an increase in demand and investing in new equipment for growth are just a few examples of “legitimate business purposes”.
The scheme launched on 6 April 2021. You can only access RLS finance through lenders that have been accredited by the British Business Bank. More lenders, including alternative finance lenders, are in the process of becoming accredited.
When you apply to the Recovery Loan Scheme, you can choose to receive your finance via a term loan, business overdraft, invoice finance or asset finance facility.
For term loans and overdrafts, between £25,001 and £2 million is available (£6M for a group with a number of subsidiaries). For invoice finance and asset finance facilities, you can apply for between £1,000 and £2 million.
When it comes to how long you have to pay the finance back, term loans and asset finance facilities are available for 6 years, and invoice finance facilities and overdrafts are available for 3. Details around things like early repayment charges will be announced shortly.
The sum of money you can borrow will depend on the lender’s assessment of your business and the requirements of the scheme.
A term loan is a loan from a bank or alternative finance provider for a specific amount. It has to be paid back according to a repayment schedule and has a fixed or variable interest rate.
A business enables you to carry on accessing funds when your balance drops below zero. As with most types of finance, you'll have to pay interest on the amount you borrow.
Invoice finance allows you to release cash tied up in customer invoices by borrowing money based on what your customers owe your business.
Asset finance facilities let you spread the cost of an asset (like machinery, equipment or a vehicle) over a set period of time. At the end, you can pay the rest off to own it outright, return it or upgrade it to a newer model.
To help support more lending to SMEs, the UK Government will provide an 70% guarantee to the lender. It’s important to remember that you’ll have to pay any interest and fees associated with the finance from the beginning. (This differs from the CBILS, where the Government covers 12 months of interest payments and lender-levied charges.)
If you take out finance worth up to £250,000, you won’t have to offer a personal guarantee. For amounts above this, you may have to provide one, but you won’t be required to offer your principal private residence as security. The borrower always remains 100% liable for the debt, so it's important to know that you can meet the terms of the loan.
Fees and interest rates will differ from lender to lender, however the Government has capped fees at 14.99% on an annual effective rate basis (interest, broker fees, other fees). Upfront are fees capped at 5%. Bear in mind that the RLS is designed to improve the terms on offer to you, however the lender should tell you if there's a business loan with even more favourable terms.
The Recovery loan Scheme has been designed with accessibility in mind. That’s why there’s no maximum turnover and businesses operating in most sectors can apply. You can also apply if you’ve already received support from the CBILS, CLBILS or BBLS initiatives.
To be eligible, your business must:
be trading in the UK
be viable or would be were it not for the pandemic
have been impacted by the coronavirus pandemic
not be in collective insolvency proceedings (further details to follow)
The following businesses can’t apply: banks, building societies, insurers and reinsurers (excluding insurance brokers); public-sector bodies and state-funded schools.
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 your:
Details of assets
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.