Great news, help is at hand for small and medium-sized business feeling the pressure. The Government has extended the Recovery Loan Scheme (RLS) for an additional two years. The scheme was first launched in April 2021 to help businesses recover from the impact of the Covid-19 pandemic. Up to now almost 19,000 businesses have obtained support under the scheme.
Key information about the scheme
The RLS is a Government-backed scheme that aims to provide financial help to businesses recovering from the Covid-19 pandemic. Loans under the scheme are available through a network of accredited lenders.
The scheme was first launched in April 2021 and was originally due to end 31 December 2021. However, the scheme was initially extended until 30th June 2022, although from 1st January 2022, the scope of the scheme was narrowed, and the maximum loan size was reduced. In July 2022, it was announced that the scheme would continue to run for an additional two years.
Key features of the scheme:
It is only open to small and medium-sized businesses
The maximum amount available under the scheme is £2 million per business group
The scheme supports a wide range of products including term loans, overdrafts, asset financing and invoice financing
Overdrafts and invoice financing are available on a variety of terms, ranging from three months to three years
Terms loans and asset financing facilities are available on terms ranging from three months to six years
The Government will provide the lender with a 70% guarantee, thus reducing the risk to lenders (however, the borrower still remains liable for 100% of the debt)
Loans are at the discretion of the lender
Personal guarantees can be taken at the lender’s discretion (although the borrower’s main residence cannot be taken as security)
The effective rate of interest, upfront and other fees cannot exceed 14.99%
Borrowers who have previously taken advantage of a bounce back loan or recovery loan are allowed to take an additional recovery loan from 1 August 2022 (although previous loans may reduce the amount of finance available).
Eligibility criteria
To be eligible for support under the RLS you must pass certain eligibility tests.
The scheme is only open to small and medium-sized business, which are businesses with a turnover of no more than £45 million. If your business is part of a group, the £45 million turnover limits apply to the group as a whole.
You must also be conducting a trading activity in the UK and generating at least 50% of your income from trading activities.
In addition, you must not be classed as a ‘business in difficultly’. This does include not being in insolvency proceedings.
Unlike earlier versions of the scheme, you no longer need to meet a Covid-19 impact test or demonstrate that your businesses were negatively affected by the Covid-19 pandemic. However, it is up to the lender and they will assess whether you have a viable business proposition during your application.
Applications should be made directly to the lender.
If your business is struggling, talk to us about possible financing options, including the Recovery Loan Scheme. We may be able to help you apply for this scheme to ensure you have the best chances of success.
We may also know of other or more appropriate schemes for your business.
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