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FINANCE OPTIONS - BUSINESS SUPPORT

Recovery Loan Scheme (RLS)

Picking up where CBILS and BBLS left off, the RLS will be vital in bridging the gap and will help smooth future cash flows for businesses as the economy opens up. 
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Government backed scheme for your business

RLS is a new government loan scheme that will replace the now closed Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS). Download datasheet.

Key Facts

Available between 6 April and 31 December 2021

£25,001 and £10 million per business as term loan or overdraft

£1,000 and £10 million as invoice finance or asset finance

Provides favourable terms, APR capped at 14.99%

No PG up to £250k

No turnover limit for applications

Bridging the gap

Of the 1.5 million SMEs with a BBL, many will need further financing as the economy opens and working capital is squeezed. The RLS bridges the gap.

The maximum APR rate of a Recovery Loan will be 14.99%. If you assume a business requires a further £50k via a Recovery Loan and borrows at the maximum 14.99% rate, to top up their existing £50k BBL, then the weighted average APR for £100k loan will be 8.745% for £100,000 of borrowing, very close to the low end of high street overdraft range 5-35%, and much lower than credit card fees.

Affordability - what lenders look for

Lenders typically look for 1.5-2x serviceability cover based on EBITDA less Dividends less Current Debt Repayments (retained earnings)

If a business seeks a loan of £180,000 over 5 years at 5% interest, the annual repayments are £39,780.

The business must therefore generate c£75,000 of retained earnings to evidence serviceability of this new loan. If the business is unable to evidence this level of serviceability, a lower quantum offer may be made or a potential decline.

The maximum amount a business can borrow varies starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts. The maximum value of a facility per business is the lesser of £10m or 25% of 2019 turnover or double the wage bill of 2019.

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Repaying the loan

The borrower will always be responsible for repaying the loan. The government will only repay the loan if the business cannot - up to 80%. The repayments for RLS start from month one. 

The decision to lend is at the lenders discretion. Our view, at Capitalise.com, is that lenders will only lend to businesses that have recently shown affordability to support the loan.

Exclusions

Maximum 25% of turnover

Loans in the scheme are limited to a maximum of 25% of 2019 turnover or £10m, whichever is lower. 

Revenue from 'trading activities'

At least 50% of revenue must be from ‘trading activities’ this excludes rental income.

For UK-based businesses

Be UK-based in its business activity, with an annual turnover of no more than £45m.

Don't apply straight to the RLS

The business applies for finance, the lender will then  decide whether they qualify for RLS or a business-as-usual loan.

FAQ

Once lenders have been approved by The British Business Bank you'll be able to apply for RLS funding directly from within the Capitalise platform. 

Please be aware that some lenders may request additional information but this list is the minimum we need to be able to determine which lenders are
most appropriate:


• Loan amount, purpose, and term
• A short paragraph on the business background and how it has been impacted by Covid-19
• Last 2 full sets of filed accounts
• Last 12 months bank statements (PDF format & no older than 7 days)
• Shareholder & directors details - name, DOB and home address
• Up to date management accounts
• Current debt position of existing loans, facilities etc

Term loans, overdrafts, asset finance, and invoice finance.

Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years.

Yes, a Recovery Loan can sit alongside existing government-supported facilities without the need to refinance - if below the maximum facility limit. Anything borrowed under CBILS or CLBILS will count towards a business’ maximum amount.

Yes, subject to meeting the scheme eligibility requirements and provided they do not borrow more than what the business is entitled to.

Eligibility is very similar to CBILS.

Provided other criteria are met, RLS is open to:

  • sole traders;
  • corporations;
  • limited partnerships;
  • limited liability partnerships;
  • co-operatives and community benefit societies; and
  • any other legal entity carrying out business activity in the UK with business activity operating through a business account.