The new form of the Recovery Loan Scheme (RLS) is designed to support access to finance for UK businesses as they look to invest and grow.
Businesses can use the finance for any legitimate business purpose – including managing cash flow, investment, and growth. However, businesses must be able to afford to take out additional debt finance for these purposes.
The British Business Bank will administer the scheme on behalf of the Secretary of State for the department for business, energy & industrial strategy (BEIS).
Key features include:
- Up to £2 million per business group: The maximum amount of a facility provided under the scheme is £2 million per business group for borrowers outside the scope of the Northern Ireland Protocol, and up to £1 million per business group for Northern Ireland Protocol borrowers. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
- Wide range of products: RLS supports term loans, overdrafts, asset finance and invoice finance facilities. Not all lenders will be able to offer all products.
- Term length: Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years.
- Access to multiple schemes: Businesses that took out a CBILS, CLBILS, BBLS or RLS facility before 30 June 2022 are not prevented from accessing RLS after 1 August 2022, but in some instances borrowing under these schemes may reduce the maximum amount you are eligible for.
- Pricing: The annual effective rate of interest and upfront and other fees cannot be more than 14.99%.
- Personal guarantees: Personal guarantees can be taken at the lender’s discretion, in line with their normal commercial lending practices. Principal Private Residences cannot be taken as security within the scheme.
- Guarantee is to the lender: The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it has completed its normal recovery process. The borrower always remains 100% liable for the debt.
- Decision-making delegated to the lender: Recovery Loan Scheme-backed facilities are provided at the discretion of the lender. Lenders are required to undertake their standard credit and fraud checks for all applicants.
The assistance provided through RLS, like many government-backed business support activities, is regarded as a subsidy and is deemed to benefit the borrower. There is a limit to the amount of subsidy that may be received by a borrower, and its wider group, over any rolling three-year period. Any previous subsidy may reduce the amount a business can borrow.