08 Apr Recovery Loan Scheme (RLS) open for applications
The £75bn Recovery Loan Scheme (RLS) is now open to applications. This is the latest government Covid-19 support scheme which will provide support to businesses across the UK as they recover from the pandemic.
The scheme opened on April 6 (2021) and is available to businesses affected by the pandemic, including those who have already received funding from other schemes, although the amount you have borrowed under an existing scheme may in certain circumstances limit the amount you may borrow under RLS.
There is a pot of £75bn available and it will be in operation until December 31 (2021) and can be applied for on top of any local government business grants.
The main stipulation is that a business applying for the RLS must have been negatively affected by Covid-19 and the loan must be used for a legitimate business purpose such as managing cash flow, investment and growth.
There is no turnover restriction for businesses accessing the scheme, and if a business has already used one of the other loan schemes the RLS is still available. However, the amount borrowed already under an existing scheme may limit the amount available to borrow under the new scheme.
How does the recovery loan scheme work?
The RLS will initially be available through lenders accredited by the British business bank. Accredited lenders include Bank of Scotland, Barclays, HSBC, NatWest, Lloyds Bank, Paragon, RBS, Santander, Skipton Business Finance, Yorkshire Bank and Clydesdale Bank.
A key purpose of the RLS is to improve the lending terms available to businesses, but if a lender can provide better loans on a commercial basis they should do so.
The lenders can provide up to £10m by any of the following facilities:
- Term loan
- Invoice finance
- Asset finance; and
The RLS gives lenders a government-backed guarantee against the outstanding balance of the facility, but borrowers are 100% liable for the debt.
Loans of £250,000 or less will not require the lender to take any form of personal guarantee.
For loans over £250,000, the lender can decide whether to take personal guarantees. However, above £250,000, the maximum amount that can be covered under the 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.
It is important to note that no personal guarantees can be held over principal private residences.
The RLS scheme is capped at a total loan facility of £10m per business (or £30m per group). Minimum facility sizes are varied starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
The annual effective rate of interest, upfront fee and other fees cannot exceed 14.99%.
The accredited lenders will undertake standard credit, fraud, Anti-money laundering (AML) and Know Your Customer (KYC) checks for all applications. Lenders will overlook short to medium term factors if these arise because of the pandemic. Approaches may vary between the lenders.
The following evidence will likely need to be provided to show the facilities can be paid back:
- Management accounts.
- Business plan.
- Historic accounts, and;
- Details of assets.
Please follow the link below for full details of the Recovery Loan Scheme from the British Business Bank:
Staying up to date
Our ethos at Infinity Partnership has always been that we are not just your accountants, but your partners in business – and in these challenging times this has never been more important.
We want to assure you that we are doing everything we can to help you, and should you have any question, big or small, please get in touch.
We are here to help.
We will be releasing various documents with help and advice through various channels. Please connect with our team on LinkedIn and Twitter:
Simon Cowie – Manging Director – https://www.linkedin.com/in/simon-cowie-ab36714b/
Greg Houston – Associate Director – https://www.linkedin.com/in/greg-houston-95900a42/
Alex Graham – Client Relationship Manager – https://www.linkedin.com/in/alex-graham-b78390138/
Bruce Giles – Client Relationship Manager – https://www.linkedin.com/in/bruce-giles-189a4b62/
Mark Rhynas – Tax Manager – https://www.linkedin.com/in/mark-rhynas-att-1712265b/
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