The Government has launched its long-awaited recovery loan scheme today (April 6).
Announced at last month’s Budget, the recovery loan scheme (RLS) has replaced the Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS).
The aim of the scheme is to help businesses of all sizes to access loans and other finance so they can recover from the pandemic and move forward. It can be put towards improvements like managing cash flow, growth and investment.
Up to £10m is available per business. The minimum funding is £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts. The total amount offered is at the discretion of the participating lender. They will carry out credit checks and fraud checks before granting you the finance.
>See also: What is invoice finance?
The Government is guaranteeing 80 per cent of the finance to the lender and the borrower will always be 100 per cent liable for the debt. The annual interest rate and upfront and other fees cannot be more than 14.99 per cent.
Unlike BBLS and CBILS, the RLS is being lent on standard commercial banking terms. Kreston Reeves says that businesses will need to pay arrangement fees and repay loans with interest from the outset.
John Walsham, business development and funding consultant at Kreston Reeves, explains:
“Questions had been raised over whether directors would be required to provide personal guarantees, and whilst guidance was published late in the day, it has now been confirmed that they will not be required for borrowing below £250,000.
“It is expected that lenders will charge a premium to their usual rates recognising that in many instances they will be relying solely on the Government guarantee as their security.
“Businesses should note, however, that the 80 per cent Government guarantee does not mean they escape liability for the loan. If a business defaults and a lender cannot recover the money borrowed, it can then turn to the Government which will then refund the lender up to 80 per cent of the loan value.”
The scheme will be open until December 31, subject to review.
Who are the accredited Recovery Loan Scheme lenders?
The British Business Bank (BBB) has outlined the accredited lenders which are listed below.
Revolving credit (overdrafts)
How do I apply?
You can apply directly through your lender. Check the links above for more details.
How long is the term?
The length depends on what kind of finance you’re applying for.
- Up to three years for overdrafts and invoice financing facilities
- Up to six years for loans and asset finance facilities