The Recovery Loan Scheme has been launched today (6th April 2021) and supports access to finance for UK businesses as they grow and recover from the disruption of the COVID-19 pandemic. The scheme is open until 31 December 2021, subject to review.
Further details can be found at https://www.gov.uk/guidance/recovery-loan-scheme
Key features of the scheme
Up to £10m facility per business
The maximum amount of a facility provided under the scheme is £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Guarantee to the lender to encourage lending
The scheme gives the lender a government-backed guarantee against the outstanding balance of the facility.
As the borrower, you remain 100% liable for the debt.
Interest and fees to be paid by the business from the outset
Businesses are required to meet the costs of interest payments and any fees associated with the RLS facility.
The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.
Term length
For term loans and asset finance facilities: from three months up to six years.
For overdrafts and invoice finance facilities: from three months up to three years.
Personal guarantees
Personal guarantees are not permitted for facilities of £250,000 or less. Above £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. No personal guarantees can be held over Principal Private Residences.
Turnover limit
There is no turnover restriction for businesses accessing the scheme.
Access to multiple schemes
Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme, although the amount they have borrowed under an existing scheme may in certain circumstances limit the amount they may borrow under RLS.
Thank you to Chamber member David Simpson, Financial Adviser (Newcastle Financial Advisers) for this useful summary.
