What is the UK Recovery Loan Scheme?
The scheme was launched in 2021 initially to help small businesses with the impact of the pandemic by lending them money via group of lenders who in turn had the backing of the government should things go wrong. The good news is that it has been extended by a further two years. So far, the scheme has supported over 16,000 English businesses, as well as 1,000 businesses in Scotland, 600 Welsh businesses and 300 in Northern Ireland.
Examples of businesses which have benefited from the scheme include Leeds-based firm Wildfire Marketing, which used the loan to take on new employees to help the business grow, and White Light Ltd, a lighting firm which required finance to purchase new equipment for the latest West-End shows.
How does it work?
The principle behind the extended Recovery Loan Scheme remains unchanged: government will underwrite 70% of lender liabilities, at the individual borrower level, in return for a lender fee. Lenders must ensure that the benefits of the government guarantee are passed through to businesses.
The maximum loan size remains at up to £2m. However, recognising that businesses and the UK more generally are now in a better position than they were during the pandemic, lenders may now require a personal guarantee from the borrower, in line with standard commercial practice.
UK-based small businesses with a turnover of up to £45 million (including on a group basis, where part of a group) will be eligible to apply.
Key features of the revised RLS include:
- Maximum amounts. Loans can be up to £2 million per business group (or £1 million for borrowers in scope of the Northern Ireland Protocol).
- Term length. Term loans and asset finance facilities are available from three months up to six years, while overdraft and invoice finance are available from three months up to three years.
- Government-backed guarantee. The lender has the advantage of a 70% government backed guarantee against the outstanding balance. The borrower remains 100% liable for the debt.
- Personal guarantees. These can be requested at the lender’s discretion.
- Multiple schemes. Businesses that took advantage of the previous iteration of the RLS, or other COVID-19 related financial support schemes, can still access the revised RLS if they meet the eligibility criteria.
How do I find out more?
Participating lenders will be listed on the British Business Bank website when they are open for applications. Further information is available on the British Business Bank website at: https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/
