The Government launched the recovery loan scheme (RLS) in April 2021 to help businesses recover from the impact of COVID-19.
Originally due to close on 31 December 2021, the Government recently extended the RLS to 30 June 2022, but the rules will change at the turn of the year.
There are some great options available under the scheme, but soon, your business might not be able to get as big a loan as it needs.
Furthermore, it can take time to find the right lending for you and to collate the paperwork you need. Read on to find out if you’re eligible, what’s on offer, and how to apply.
Who’s eligible for a recovery loan?
You can apply for the scheme if your business is trading in the UK and has been adversely affected by the impact of COVID-19.
Your borrowing proposal must be considered viable by the lender, which means that you should be able to show that your business would be operating normally had it not been for the pandemic.
Fortunately, lenders tend to be more lenient recovery loans than your bog standard one, seeing how they will get 80% of the loan from the Government if a business defaults on it.
Unfortunately, if you’re already in insolvency proceedings, you’re no longer eligible to apply for the RLS.
However, you’re still eligible if you received support from any of the other coronavirus loans schemes.
Be aware: from January 2022, the scheme will only be open to SMEs, so if you’re a larger business, make sure you apply before the turn of the year.
How does the scheme work?
At present, you can apply for between £25,001 and £10 million in the form of a term loan or an overdraft. Invoice finance and asset finance is also available between £1,000 and £10m.
There’s up to £250,000 available without the need for a personal guarantee. When you borrow over £250,000, the lender will decide whether or not they require a personal guarantee for your borrowing.
But there’s a bit of a safety net here – no lender can hold a guarantee over your principal private residence.
Changes announced in Autumn Budget 2021
As mentioned earlier, the Chancellor has extended the deadline for applications until 30 June 2022.
However, after the original December 31 deadline the scheme parameters will be tightened.
Only small and medium-sized businesses will be able to apply and funding will be capped at £2 million per business.
Moreover, the government’s guarantee coverage provided to lenders will reduce from 80% to 70%.
How can you apply for a recovery loan?
The RLS is only available through lenders accredited to the scheme by the British Business Bank.
Every lender will offer different products, terms and conditions. For example, two recently-approved lenders offer interest-only payment terms.
There are currently 71 approved lenders, so it can take a bit of sifting to find the right borrowing for your circumstances.
It’s also a good idea to approach your current finance provider to seek the lending you need. In some circumstances, they might be able to provide you with a commercial loan on better terms than those offered under the RLS.
We can help
With so many providers and different financial products available, it can seem like an arduous task to find the right lending for you. We can help.
We’ll discuss with you which product is right for your business, and find the best terms for you. We’ve helped a number of businesses with their RLS applications and we can find borrowing that fits your needs.
Get in touch today if you’d like to find out more.