With non-essential retail and outside hospitality having reopened their doors for 12 April, the Government has started to roll out a further wave of financial support to businesses known as the recovery loan scheme (RLS). Chancellor Rishi Sunak unveiled the programme in his budget speech on 3 March as a replacement for the bounce-back loan scheme (BBLS) and coronavirus business interruption scheme (CBILS), which ended on 31 March. The scheme launched on 6 April 2021 and aims to help businesses of various sizes, "from coffee shops and restaurants, to hairdressers and gyms" through Government-guaranteed loans as they balance on the tightrope to economic recovery. Business Secretary Kwasi Kwarteng said: "We're doing everything we can to back businesses as we carefully reopen our economy and recover our way of life. "The launch of our new Recovery Loan Scheme will provide businesses with a firm foundation on which to plan ahead, protect jobs and prepare for a safe reopening as we build back better from the pandemic". The RLS was announced in the Budget alongside the Government's restart grant scheme which provides non-essential retail business £6,000 per premises, and £18,000 to hospitality and leisure venues.
What's available? The loans offered under the RLS vary in size with £25,001 to £10 million being up for grabs. Invoice and asset financing is available from £1,000, as well as revolving door credit from some lenders. The loans are 80% backed by the Government, meaning the Government will pay lenders 80% of the original loan amount if a claimant business defaults. Businesses are liable to repay the entirety of the loan along with the interest accrued on the payment. The Government has capped rates at 14.99%, but the Treasury is expecting interest rates to be lower than the top limit, with ministers reportedly urging lenders to keep rates down to "help protect jobs". Claimants can access term loans and asset finance facilities that last from three months up to six years, with overdrafts and invoice finance lasting from three months to three years.
How to apply To claim, businesses must apply through one of the 18 accredited lenders directly, which are listed on the British Business Bank (BBB) website, the organisation that is administering the scheme. The applicant's business must have been negatively affected by COVID-19 to qualify for the RLS, although the finance can be used for any legitimate business purpose including cashflow management, growth and investment. Individual RLS accredited lenders are in control on deciding whether a business is eligible for the scheme. No form of personal guarantee is needed for loans below £250,000, but the BBB stipulates above this, "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". Lenders must still undertake standard credit, fraud and know-your-customer checks for all applicants, but owing to the RLS's focus on coronavirus support, lenders are more likely to overlook poor short-to-medium business performance. Businesses still need to be equipped with a viable business plan, on top of management accounts and asset details to present to lenders.
Previous support Businesses that received loans from BBLS and CBILS can still apply for the RLS, but participation in previous support schemes may reduce the amount claimants can receive. The deadline for applications to the BBLS and CBILS closed on 31 March 2021. These and similar loan schemes account for a total £75bn of the Government's £350bn wider coronavirus support package. Talk to us about your eligibility for the recovery loan scheme.