The Recovery Loan Scheme aims to improve the terms on offer to borrowers. If a lender can offer a commercial loan on better terms, they will do so.

The Recovery Loan Scheme

The Recovery Loan Scheme (RLS) is designed to support access to finance for UK businesses as they look to invest and grow.

The scheme will support facility sizes of up to £2million for borrowers outside the scope of the Northern Ireland Protocol. Borrowers in scope of the Northern Ireland Protocol may borrow up to £1million unless they operate in a sector where aid limits are reduced – in which case the maximum that can be borrowed is subject to a lower cap. These include agriculture, fisheries/aquaculture, and road freight haulage.

Businesses can use the finance for any legitimate business purpose – including managing cashflow, investment and growth. However, businesses must be able to afford to take out additional debt finance for these purposes.

The British Business Bank administers the scheme, there are several accredited lenders that Wattsford Commercial Finance will broker finance on behalf of clients.

What can the Recovery Loan Scheme be used for?

• Access cash flow
• Grow your business

• Purchase equipment
• Pay a one-off cost

• Help with payroll
• Invest in marketing

Key features of the Recovery Loan Scheme

The Recovery Loan Scheme aims to improve the terms on offer to borrowers. If a lender can offer a commercial loan on better terms, they will do so.

• Up to £2 million per business group
  The maximum amount of a facility provided under the scheme is £2 million per business group for borrowers outside the scope of the Northern Ireland Protocol, and up to £1 million per business group for Northern Ireland Protocol borrowers. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
• Wide range of products
  RLS supports term loans, overdrafts, asset finance and invoice finance facilities. Not all lenders will be able to offer all products.
• Term length
  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.
• Pricing
  The annual effective rate of interest and upfront and other fees cannot be more than 14.99%.

• Access to multiple schemes
  Businesses that took out a CBILS, CLBILS, BBLS or RLS facility before 30 June 2022 are not prevented from accessing RLS after 1 August 2022, but in some instances borrowing under these schemes may reduce the maximum amount you are eligible for.
• Personal Guarantees
  Personal guarantees can be taken at the lender’s discretion, in line with their normal commercial lending practices. Principal Private Residences cannot be taken as security within the Scheme.
• Guarantee is to the lender
  The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it has completed its normal recovery process. The borrower always remains 100% liable for the debt.

Eligibility criteria includes

• Turnover limit
  The scheme is open to smaller businesses with a turnover of up to £45m (on a group basis, where part of a group).
• UK-based
  The borrower must be carrying out trading activity in the UK and, for most businesses, generating more than 50% of its income from trading activity.
• No Covid-19 impact test required
  Unlike the previous iteration of the scheme, for most borrowers there is no requirement to confirm they have been affected by Covid-19.
• Business in difficulty
  The borrower must not be a business in difficulty, including not being in relevant insolvency proceedings.

• Viability test
  The lender will consider that the borrower has a viable business proposition but may disregard (at its discretion) any concerns over its short-to-medium term business performance due to the uncertainty and impact of Covid-19.
• Subsidy limits
  Borrowers will need to provide written confirmation that receipt of the RLS facility will not mean that the business exceeds the maximum amount of subsidy they are allowed to receive. All borrowers in receipt of a subsidy from a publicly funded programme should be provided with a written statement, confirming the level and type of aid received.