What Businesses Need to Know About the Recovery Loan Scheme

Thursday, August 5th, 2021

Without a doubt, business owners have been hit hard over the past year. New financial measures have recently been introduced and rolled out on April 6, 2021 (and is set to run until December 31) in an effort to assist them. The latest financial measure, the Recovery Loan Scheme (RLS), was announced in the Budget as a replacement for the Coronavirus Business Interruption Loan Scheme (CBILS). 

What is the Recovery Loan Scheme?

Essentially, RLS is designed to support viable businesses through a meaningful, sustainable recovery. There are a few key things about this scheme that set it apart:

• It’s open to more businesses. Unlike the CBILS, lenders are able to set their own minimum turnover requirement. This allows them to set it in line with their own eligibility criteria and risk preferences.
• More generous borrowing limits. It isn’t just turnover requirements that are more generous; the recovery loan scheme allows businesses to borrow up to £10 million, paying it back over a 6 year period.
• Not as generous fees and interest. On the other hand, the recovery scheme isn’t as flexible as the CBILS arrangement, in which the government covers the interest and fees for the first year. This burden falls on the business owner from the start.
• It’s 80% government-backed. The government guarantees 80% of the RLS facility for lenders, which means businesses are more likely to receive a better rate/higher amount.
• No personal guarantees under £250,000. If the amount borrowed is below £250,000, there is no need for a personal guarantee. (A personal guarantee means the individual who takes out the loan for their business is agreeing to be legally responsible for the debt if it cannot be paid back).

Who is Eligible for the Recovery Loan Scheme?

In most cases, you are likely eligible for the recovery loan scheme if:

• Your business is based in the UK.
• It is either viable, or it would have been if the pandemic had not occurred. 
• Your business has felt the effects of the pandemic.
• It is not currently in collective insolvency proceedings.

How Does the RLS Compare to Alternative Options?

Of course, the RLS is by no means the only finance option available for businesses to boost their cash flow and operations during these uncertain times. You should also consider other options like merchant cash advance, invoice finance, early repayment business loans, asset finance, etc. 

Above all, make sure the option you choose meets your short-term cash and growth needs, without putting your business in a tight financial situation in the future. Be sure to use resources like bestpaymentproviders.com to browse reviews and find the right lender for your business type and industry.