New Recovery Loan Scheme launches to UK businesses

The scheme, announced at the Budget on 3rd March, is scheduled to run until 31st December 2021, subject to review.

The new scheme will support borrowing of up to £10m for individual businesses and up to £30m across a group, and, once received, the funds can be used for any legitimate business purpose, including managing cashflow, growth and investment. It is designed to appeal to businesses that can afford to take out additional finance for these purposes.

The British Business Bank, which will administer the scheme on behalf of the Government, administered the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).

The maximum amount of a facility provided under the scheme is £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Businesses can choose from term loans, overdrafts, asset finance and invoice finance (subject to the lender being accredited for each of these finance types).

Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years.

Interest and fees to be paid by the business from the outset. Businesses are required to meet the costs of interest payments and any fees associated with the RLS facility. The annual effective rate of interest and upfront and other fees cannot be more than 14.99%.

Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme, although the amount they have borrowed under a previous scheme may in certain circumstances limit the amount they may borrow under RLS.

Personal guarantees are not permitted for facilities of £250,000 or less. Above £250,000 the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied. No personal guarantees can be held over Principal Private Residences.

To be eligible, the borrower must be UK-based and able to confirm to the lender that it has been impacted by Covid-19. The lender will consider that the borrower has a viable business proposition but may disregard any concerns over its short-to-medium term business performance due to the uncertainty and impact of Covid-19.