Unlocking the Benefits of the Recovery Loan Scheme

The Recovery Loan Scheme (RLS) has been a game-changer for many UK businesses, offering much-needed financial support in the wake of the Covid-19 pandemic. But what exactly is the RLS, and how can your business take advantage of it? In this comprehensive guide, we’ll explore the ins and outs of the RLS, from understanding its purpose and administration to navigating eligibility criteria and application processes. Get ready to unlock the benefits of this powerful government-backed initiative to secure the future of your business.

Key Takeaways

• The Recovery Loan Scheme is a UK government-backed initiative providing businesses with access to improved lending terms and post-pandemic investment until 2024.
• Businesses eligible for the RLS can apply through accredited lenders, including refinancing existing debt from previous Covid-19 recovery schemes, subject to eligibility criteria and restrictions.
• Swoop UK offers assistance in identifying alternative financing options tailored to individual business needs.

Understanding the Recovery Loan Scheme (RLS)

The RLS is a government-backed initiative designed to provide UK businesses with access to improved lending terms and post-pandemic investment. Administered by the British Business Bank plc, a development bank wholly owned by the UK government, the scheme replaces previous Covid-19 recovery schemes such as the Business Interruption Loan Scheme.

Launched on April 6, 2021, the RLS will continue to offer financial support to businesses until 2024, with a two-year extension announced on July 20, 2022.

The role of the British Business Bank

The British Business Bank’s pivotal role in administering the RLS involves providing businesses with valuable guidance and resources, including cash flow management and independent advice services. The scheme offers various loan types, including term loans, overdrafts, invoice finance, and asset finance facilities, to suit a range of business needs. Furthermore, the RLS does not require personal guarantees for loans under £250,000, helping businesses access financing without putting their assets at risk.

Businesses that are not eligible for the RLS include:

• Banks
• Building societies
• Insurers (excluding insurance brokers)
• Public-sector bodies
• State-funded primary and secondary schools

The British Business Bank, however, is not authorized or regulated by the Prudential Regulation Authority or the Financial Conduct Authority, ensuring a level playing field for all eligible businesses.

Replacing previous Covid-19 recovery schemes

The RLS, superseding previous Covid-19 recovery schemes like BBLS, CBILS, and CLBILS, presents updated terms and conditions for better support of businesses in the post-pandemic landscape. With loans available up to £10 million and a maximum repayment period of six years, the government guarantees 80% of the loan amount, leaving the lender responsible for the remaining 20%. To be eligible for the RLS, businesses must be situated in the UK, possess an annual turnover of up to £45 million, and have been in operation on or before March 1, 2021.

As the RLS replaces previous schemes, businesses that have already received support from BBLS, CBILS, or CLBILS are still eligible to apply for an RLS loan, provided they meet the necessary criteria. This ensures that businesses can continue to access vital funding and support even as the economic landscape evolves.

Key Features of the RLS

The RLS offers a range of features tailored to the needs of eligible businesses. With loan amounts up to £2 million and various loan types available, the scheme provides flexible financing solutions for businesses across different sectors and stages of growth.

The government guarantee for most borrowers under the RLS stands at 70%, subject to normal commercial lending practices, policies, and regional limitations, without the need for a personal guarantee.

Loan amounts and types

The RLS offers loans ranging from £25,001 to £2 million per business group, catering to a wide spectrum of financial needs.

Businesses operating in the scope of the Northern Ireland Protocol, however, face a maximum loan amount of £1 million per business group. The different loan types available under the RLS include:

• Term loans
• Overdrafts
• Invoice finance
• Asset finance

These options ensure that businesses can access the most suitable financing option for their specific requirements.

Government guarantee reduction

As of January 1, 2022, the UK Government reduced the guarantee for RLS loans from 80% to 70% for new applications, yet the guarantee remains in place until the scheme closes in 2024. This reduction is in line with the government’s aim to gradually lessen its financial involvement in the scheme as the economy recovers from the pandemic.

Despite the reduced guarantee, the RLS continues to provide businesses with valuable financial support, backed by a 70% government guarantee against the outstanding balance of the facility following the completion of the customary recovery process.

Eligibility Criteria and Requirements

To be eligible for the RLS, businesses must meet certain criteria, including being based in the UK, generating more than 50% of their turnover from trading activity in the UK, and not being in relevant insolvency proceedings. Lenders will also conduct credit checks and potentially fraud checks to ensure businesses meet the necessary requirements.

However, certain businesses and sectors are not eligible for the scheme, as detailed in the following subsections.

Ineligible businesses

Banks, building societies, insurers (excluding insurance brokers), public-sector bodies, state-funded primary and secondary schools, further education colleges, and principal private residences are among the businesses not eligible for RLS.

This ensures that the recovery loan scheme aims to target businesses that are most in need of support and have limited access to other financing options.

Northern Ireland Protocol implications

The Northern Ireland Protocol imposes specific restrictions and limitations on RLS for businesses operating in the region, with a maximum loan amount of £1 million per business group.

These restrictions are in place to ensure compliance with the protocol’s regulations and maintain a level playing field for businesses across the UK.

Applying for a Recovery Loan

Businesses can apply for RLS through accredited lenders, submitting their applications online or through other designated channels. The option to refinance existing debt from previous Covid-19 recovery schemes, such as BBLS or CBILS loans, is also available for businesses that meet the eligibility criteria.

Refinancing existing debt

Refinancing existing debt with RLS is possible, but businesses must meet the eligibility criteria and may have to forego any remaining Business Interruption Payment (BIP) entitlements.

In the event of a partial or complete refinancing of a BBLS or CBILS facility, businesses must forgo their remaining BIP entitlement (up to a maximum of 12 months from the commencement of the original facility) as part of the refinancing process.

Working with accredited lenders

Cooperating with accredited lenders is pivotal to a successful RLS application. A list of participating lenders is available through the British Business Bank website, allowing businesses to choose a lender that best suits their needs and preferences.

Businesses can expedite the loan application process and boost their chances of securing RLS funds by collaborating closely with the lender and providing the required documentation and information.

Utilising Recovery Loan Funds

RLS funds can be used for various legitimate business purposes, such as expanding operations, investing in new equipment or technology, managing working capital, and paying suppliers, among others. By ensuring that these funds are utilized for a legitimate business purpose, companies can maximize their growth potential and maintain a strong financial foundation.

However, certain restrictions apply to the use of RLS funds, particularly for businesses affected by the Northern Ireland Protocol.

Restrictions on fund usage

Restrictions on RLS fund usage include specific sectors and activities affected by the Northern Ireland Protocol, as well as ineligible businesses and purposes.

Understanding and adhering to these restrictions is vital for businesses utilizing RLS funds, as it ensures compliance and prevents potential issues in the future.

Alternative Financing Options

For businesses that may not qualify for RLS or require additional funding, alternative financing options are available, presenting a viable business proposition.

Swoop UK, a government-backed initiative, offers assistance in finding suitable funding options and making savings on everyday costs, providing valuable support for businesses in need of financial guidance.

Seeking assistance from Swoop UK

Swoop UK offers free, personalised advice and support to help businesses navigate the complex landscape of alternative financing options. With access to a wide array of funding options, including:

• Asset finance
• Equity crowdfunding
• Invoice financing
• And more

Swoop UK can help businesses secure the funding they need to grow and succeed in today’s competitive landscape.

Summary

In conclusion, the Recovery Loan Scheme offers a valuable lifeline for UK businesses in need of financial support following the Covid-19 pandemic. By understanding the intricacies of the scheme, such as eligibility criteria, loan types, and restrictions on fund usage, businesses can better position themselves to take full advantage of the RLS and secure their future success. As the economic landscape continues to evolve, it is essential for businesses to explore all available financing options, including alternative sources of funding, to ensure their long-term sustainability and growth.

Frequently Asked Questions

What is the recovery loan scheme 2024?

The Recovery Loan Scheme 2024 provides businesses access to up to £2 million in affordable finance through loans, overdrafts, asset finance and invoice finance. This extension offers ongoing financial support to help businesses grow and recover.

Can you still get a recovery loan?

Yes, the Recovery Loan Scheme is still available until June 2024, as announced by the secretary of state in August 2022. BBLS, CBILS and CLBILS closed on 31st March 2021, however.

What is the maximum loan amount available under the Recovery Loan Scheme?

The maximum loan amount available under the Recovery Loan Scheme is £2 million per business group.

Are there any restrictions on the use of RLS funds?

Yes, there are restrictions on the use of RLS funds, particularly for businesses affected by the Northern Ireland Protocol.

Can businesses refinance existing debt from previous Covid-19 recovery schemes with an RLS loan?

Yes, businesses can refinance existing debt from previous Covid-19 recovery schemes, such as BBLS or CBILS loans, with an RLS loan if they meet the necessary eligibility criteria.

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