The United Kingdom’s government has announced a recovery loan scheme as part of its budgetary measures aimed at mitigating the effects of the pandemic on businesses and helping them restart their activities. 

In this article, our experts answer some major questions about the Recovery Loan Scheme (RLS) including eligibility criteria and types of finances available under the scheme. So, stay with us till the end. 

Understanding Recovery Loan Scheme

The government has replaced CLBILS (the Coronavirus Large Business Interruption Loan Scheme, CBILS (Coronavirus Business Interruption Loan Scheme), and BBLS (Bounce Back Loan Scheme) with RLS. 

Authorities have halted receiving applications under CBLS at the end of March-2021. Therefore, small and medium-scale businesses are viewing this initiative as a welcomed replacement. 

Recovery Loan Scheme – An Overview 

Any business –subject to meeting the eligibility criteria – is entitled to receive financial support of up to £10 million. You can use an RLS grant for any legitimate purpose including (but not limited to) investment and growth. Under RLS, the UK govt will guarantee 80pc of the finance to the lenders. 

The key factor that makes RLS superior to all other existing Covid-19 schemes is that it is not subject to any turnover restrictions. It means you can apply for an RLS grant irrespective of the size of your business. As mentioned earlier, if approved, you will get a loan of up to £10,000,000. 

The other key factor that differentiates RLS from the current Covid-19 scheme is that of interest and fees payable on the RLS loan. If you get an RLS loan, you will pay the interest by yourself from day one. When it comes to other Covid-19 financial support schemes, the British Business Bank pays the borrower’s fees and interest for a year or the first 12 months. 

The 3rd factor that differentiates RLS from other Covid-19 financial support schemes is that you don’t have to submit any personal guarantee if you are going to apply for a loan facility worth up to £250,000. Also, the authorities will not take your principal private residence as security provided that the loan’s amount does not exceed £250,000. 

Types of finance available under Recovery Loan Scheme

The 1st type of loan that is available under RLS is term loans. The minimum threshold for term loans is £25,001 whereas the maximum threshold is £10,000,000 per business. 

The second type of loan available under RLS is “Asset finance and Invoice Finance”. The minimum threshold for these types of RLS facilities is £1,000 whereas the maximum threshold is £10,000,000. 

The term of the RLS loans are as follows:

  • If you get funds under asset finance facilities & term loans, you will have to return within 6 years. 
  • If you get support under overdrafts and invoice, you will have to return it within 3 years.  

What are the eligibility criteria for a Recovery Loan Scheme?

You are eligible to get a loan under RLS if:

  • Your business is trading in the United Kingdom. 

Also, you need to prove the following:

  • Had it not for the pandemic, your business would have been viable,
  • The pandemic has impacted your business,
  • And, your business is not in any sort of collective insolvency proceedings. 

A question here pops that are you eligible for RLS if you have already taken a loan under BBLS, CLBILS, or CBILS? Fortunately, the answer is YES!

You will be able to access the RLS even if you have received financial support under any existing Covid-19 scheme. However, the maximum amount of loan that you will get depends upon two factors: scheme requirements and individual lender’s assessment. 

The approach can vary from lenders to lenders but all businesses that are going to apply for RLS have to meet all eligibility criteria. 

Who will offer these loans under the Recovery Loan Scheme?

Several banks have already signed up for the RLS. However, authorities are yet to publish a list of all accredited lenders. 

Our tax experts here at IBISS & CO have been continuously assisting clients throughout the Covid-19 crisis. So, if you are looking to apply for financial support under RLS, and you need advice in this matter, reach out to us now for a 15-Minute Free Call


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