Changes to the Recovery Loan Scheme
On 27th October 2021, Chancellor of the Exchequer, Rishi Sunak announced as part of his Autumn Budget, an extension of the Recovery Loan Scheme (RLS).The RLS, originally due to end on 31 December 2021, has now been extended for a further six months until 30 June 2022.
What is the Recovery Loan Scheme?
The RLS, or Recovery Loan Scheme, was launched on the 6th April 2021 as a continuation of the support provided by the government in order to assist UK businesses adversely affected by the pandemic. Its introduction replaced the previous schemes of CBILS, CLBILS and the BBL which closed to new applications on the 31st March 2021.
The RLS is administered by the British Business Bank and provided by a panel of approved lenders and included a government backed 80% guarantee of the loan to the lender. Loans start from £25,000 up to a maximum of £10 million, with interest rates capped at 14.99%. The funds are available for any legitimate business purpose – however is subject to the usual affordability checks.
What are the changes to the Recovery Loan Scheme?
As well as the extension, the Chancellor also announced changes to the RLS. From 1 January 2022, the following new conditions will come into force:
- The scheme will only be open to businesses with a turnover not exceeding £45m per annum
- The maximum amount of finance available will be £2 million per business (maximum amount per Group limited to £6m)
- The guarantee coverage that the government will provide to lenders will be reduced to 70%.
Types of finance available under the RLS
A lender can provide a facility of up to £2m by way of the following:
- Term loan
- Invoice finance
- Asset Finance
The RLS gives the lender a government backed guarantee (now of up to 70% as mentioned above) however as the borrower you always remain 100% liable for the debt.
If you are borrowing less than £250,000 then the lender will not be able to take any personal guarantees.
If you are borrowing more than £250,000 the lender can ask for personal guarantees at their own discretion.
To discuss an RLS application and how we may be able to assist with arranging funding please don’t hesitate to get in touch with our team. Call us on 01270 443510 or complete our contact form and we’ll get in touch with you whenever is best to discuss your requirements.