What is the Recovery Loan Scheme (RLS)?

Recovery Loan Scheme, announced in The Budget, aims to help businesses of any size across the UK affected by Covid-19, providing support for businesses to recover and grow following the disruption of the pandemic. It is designed to appeal to businesses that can afford to take out additional debt finance and can be used for any legitimate business purpose, including managing cashflow, investment and growth.

What are the key features of RLS?

RLS guarantees a wide range of products, covering term loans, overdrafts, asset finance and invoice finance facilities. Businesses can borrow up to a maximum of £10 million, available on repayment terms up to six years (for term loans and asset finance) and up to three years (for overdrafts and invoice finance facilities) [1].

Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Businesses will be required to meet the costs of interest payments and any fees associated with the facility from the outset.

Lenders will be required to undertake standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders.

The scheme provides the lender with a government-backed 80% guarantee against the outstanding balance of the facility. The business remains 100% liable for repayment of the facility.

Am I eligible?

The scheme is open to most businesses, who meet the eligibility criteria, regardless of turnover.

A business with an existing facility under either the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) or the Coronavirus Large Business Interruption Loan Scheme (CLBILS) can still access the new scheme, providing it is eligible and with total borrowing subject to a lender’s assessment of affordability.

To be eligible for a facility under the Recovery Loan Scheme, a business must meet certain eligibility criteria including but not limited to:

  • Be able to self-certify that it has been impacted by Covid-19;
  • Be UK-based in its business activity and generate more than 50% of its turnover from trading activity (registered charities and further education establishments are exempt from this requirement);
  • Be engaged in trading activity in the UK at the time it draws down the facility;
  • Have a borrowing proposal which would be considered viable by the lender. In making their assessment, lenders may, but are not required to, disregard any concerns over a business’s short-to-medium term business performance due to the uncertainty and impact of Covid-19; and
  • Not be in collective insolvency proceedings. If the applicant is in scope of the Northern Ireland Protocol then (i) for micro and small enterprises the business was not subject to collective insolvency proceedings or in receipt of rescue aid; or (ii) for other businesses that are not micro and small enterprises they are not an “undertaking in difficulty”, as defined by the EU.
  • A business cannot be a bank/ building society; an insurer or reinsurer (can be an insurance broker); a public-sector body; a state funded primary or secondary school; or an individual other than a sole trader or a partner acting on behalf of a partnership.
  • If a lender can offer finance on normal commercial terms without the need to make use of the scheme, they may do so.

How do I apply?

RLS is available through the British Business Bank’s accredited lenders, which are listed on the RLS Accredited lenders page. This list will be kept updated as new lenders are accredited.

In the first instance, you should approach your usual lender– ideally via their website. You may also consider approaching other lenders if you are unable to access the finance you need.

Decision-making on whether you are eligible for RLS and whether it is suitable for you is fully delegated to the accredited RLS lenders. These lenders range from high street and challenger banks to asset-based lenders and smaller specialist local lenders.

When will the scheme be accessible?

The scheme went live on 6 April and is open until 31 December 2021, subject to review.