The Recovery Loan Scheme (RLS), now live on the Capitalise platform, is a government loan scheme that allows qualifying businesses to borrow up to £10 million – either as term loans, overdrafts, invoice finance or asset finance. It replaces the now closed Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS). At present, the scheme will run until 31st December 2021.
As stated by the British Business Bank, you and your clients can apply for the scheme if Covid-19 has affected the business. You can use the finance for any legitimate business purpose – including managing cash flow, investment and growth.
If the business has already borrowed from any of the other government-backed schemes named below, RLS is still an open option, although the amount borrowed under an existing scheme may in certain circumstances limit the amount that can be borrowed under RLS.
- Bounce Back Loan Scheme (BBLS)
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
Types of finance
A lender can provide up to £10 million as one of the following facilities:
- Term loan
- Invoice finance
- Asset finance
RLS gives the lender a government-backed guarantee against the outstanding balance of the facility. The borrower is always 100% liable for the debt.
If borrowing £250,000 or less, the lender won’t take any form of personal guarantee.
If borrowing more than £250,000, the lender has the discretion to decide whether to take personal guarantees. However:
- 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
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.
There is no turnover restriction for businesses accessing the scheme.
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.
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 facility. The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.
Credit checks for all applicants
Lenders are required to undertake credit and fraud 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 new scheme will initially be available through a number of lenders accredited by the British Business Bank. New lenders under the scheme will be listed on the British Business Bank website as they become accredited.
Download our datasheet to find out more about how the new scheme works with Capitalise and how we can help your clients on their road to recovery.