The Recovery Loan Scheme (RLS) is now live, and will run to 31 December 2021, as announced in the recent Budget.
The new loan scheme ensures businesses of any size which have been affected by COVID-19 can continue to access loans and other kinds of finance, up to the value of £10m (subject to affordability). These loans can be used for any legitimate business purpose, including managing cashflow, investment and growth.
Loans will be available through a number of accredited lenders, and, as with the CBILS scheme, the Government will guarantee 80% of the finance.
What types of finance are going to be available?
– Loans and overdrafts will be available from £25,001 to £10 million per business
– Invoice finance and asset finance will be available from £1,000 to £10 million per business
What are the finance terms?
– Loans and asset finance facilities – terms of up to six years
– Overdrafts and invoice finance facilities – terms of up to three years
What is the eligibility criteria?
You will be able to apply for a loan if your business is trading in the UK AND can demonstrate that your business:
– is viable, or would be viable were it not for the pandemic;
– has been impacted by the coronavirus pandemic; and
– is not in collective insolvency proceedings.
A business which has already received support under the existing COVID-19 guaranteed loan schemes is still able to access finance under the new scheme, providing it meets the eligibility criteria highlighted above.
Businesses operating in all sectors could be eligible for funding, except:
– banks, building societies, insurers and reinsurers (but not insurance brokers)
– public-sector bodies
– state-funded schools
For further information, visit Gov.uk here.
How does the Recovery Loan Scheme (RLS) compare to the Coronavirus Business Interruption Loan Scheme (CBILS)?
– RLS provides businesses with the capability to borrow up to £10m, compared to a maximum of £5m through CBILS (subject to affordability).
– RLS does not offer payment holidays in the first year, unlike CBILS, so a business would need to be able to demonstrate it can afford the repayments on the loan from day one.
– RLS will not benefit from Business Interruption Payments which were previously offered with CBILS and BBL, whereby the Government covered the fees and interest costs in the first year. Therefore, loans taken out under RLS will have a higher APR.
If business owners are thinking of borrowing in the near future, it seems CBILS may be the cheaper option, however, the deadline of 31 March 2021 is approaching fast – we would urge you to begin your application as soon as possible. Read our blog on CBILS here.
Further information
If you would like further information or are interested in applying for the CBILS loan scheme, or the Recovery Loan Scheme, contact our team at funding@pmm.co.uk. We will discuss your funding requirements in more detail and guide you through the available finance options.
