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Recovery Loan Scheme

Published: 11 June 2021
Time to read: 3 mins

The Scheme will serve as a successor to the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme both of which were widely drawn on by Scottish businesses prior to their close on 31 March. Many businesses which have so far weathered the storm brought on by the pandemic will need continued support as the UK’s Covid recovery progresses – it remains to be seen if the RLS scheme will go far enough in its aim to assist that process.

The Scheme allows SMEs to access commercial loans as well as asset finance and invoice discounting facilities up to £10 million. The Scheme runs until the end of 2021 and all facilities will enjoy the same 80 per cent guarantee from the Treasury as was offered under the CBILS scheme.

Key figures:

  • Loans from £25,000 to £10m on 6 year terms
  • Asset finance from £1m to £10m on 6 year terms
  • Invoice Finance from £1m to £10m on 3 year terms

For facilities under £250,000 no personal guarantees are sought and charges over a Borrower/Director’s private residence cannot be taken as security.

As with CBILS and the Bounce Back schemes, funding will be deployed through eligible lenders – a list of which is available here.

There are no requirements as to maximum turnover that an applicant may have and the funding may be utilised for a variety of business purposes.

Unlike the CBILS and Bounce Back schemes, which saw the Government pick up the bill for certain expenses and a limited amount of the interest payable, the Borrower will be liable for all costs and interest associated with RLS Loans.

Interest on RLS loans (when aggregated with other fees payable) may not exceed 14.99% per annum.

Businesses which have previously received CBILS or Bounce Back loans may still be eligible for additional funding (although this may reduce the amount of loan otherwise available).

Otherwise the Scheme is open to UK based businesses which:

  • are viable or would be viable were it not for the pandemic
  • have been impacted by the coronavirus pandemic
  • not be in collective insolvency proceedings

Further details on how to apply can be found on the British Business Bank’s website here.

Funding is available through a number of Peer to Peer and alternative lenders in addition to mainstream clearing banks.

Whilst the RLS is perhaps not quite as generous as previous schemes, the key element of the 80% guarantee remains. SMEs will hope this continues to incentivise lenders to provide access to funding rather than rolling up the drawbridge. According to the latest statistics, some £70bn was lent to around 1.6 million businesses under the CBILS and BBLS schemes. Time will tell whether similar figures will be achieved under the RLS.

Gillespie Macandrew’s Banking and Finance team has assisted numerous businesses in accessing funding under the various Covid-19 loan schemes. If you have any queries regarding the RLS or seeking funding from more traditional sources please do not hesitate to get in touch with Ross – ross.macrae@gillespiemacandrew.co.uk

This article was featured in Edinburgh Chamber of Commerce’s Business Comment magazine.

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