The Recovery Loan Scheme (RLS), which was introduced as a COVID-19 lending scheme, is due to expire, with last applications being accepted on or before 30 June 2022.
RLS is the final COVID-19 government lending scheme, and although it may not be as well known as the Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loan Scheme (BBLS), it may still be beneficial to some business owners.
What can the RLS be used for?
- Business loans
- Asset finance
- Refinance – cash release
- Invoice finance
- Property finance
- Acquisition finance
The maximum length of the facility depends on the type of finance you apply for and will be:
- up to 3 years for overdrafts and invoice finance facilities
- up to 6 years for loans and asset finance facilities
What are the qualification criteria?
Following changes announced in the Autumn Budget 2021, which came into force from 1 January 2022, the RLS is currently open to SME’s:
- with a 2-year trading history,
- who are UK based,
- with a viable business proposition, and
- with a turnover not exceeding £45m per annum.
The maximum amount of finance available is £2million per business and the guarantee coverage that the government provide to lenders is 70%.
It is helpful to note that you are able to apply for the RLS even if you have already taken out a loan under CBILS or BBLS, as long as you meet the other eligibility criteria highlighted above.
What are the benefits of the RLS?
The main aim of the government-backed scheme is to improve the terms on offer to SME businesses.
Benefits to businesses include:
- the first £250,000 does not require a personal guarantee
- for amounts over £250,000, a personal guarantee is only required up to a maximum of 20% (after the proceeds of business assets have been applied)
- a 6 month, interest free period at the beginning of the loan (particularly beneficial, given the likely interest rate rise predicted over the next 12-24 months)
- the option to refinance existing debt at a lower interest rate
It’s important to note that, from July 2022, the government will no longer back lenders in the event that an SME defaults on their loan.
Should I apply for the RLS?
The RLS may be worth considering if your business is:
- Aiming to improve its long-term capital position
- In need of a third-party business loan to secure its recovery
- Planning to invest in new assets and equipment
- Looking to fill a short-term cash flow gap
- In need of a new facility to reduce pressures of overdraft use
- Thinking about taking on more staff, or premises, to aid its recovery
- Limited by long payment terms with large amounts of outstanding invoices
Get in touch
If you are interested in applying for a loan under the RLS scheme in order to improve your long-term capital position, fill a short-term cash flow gap, invest in new assets or equipment, or something else, get in touch with Jill Morris by clicking the button below to discuss in more detail. Remember, the deadline for applications is 30 June 2022.
