COVID-19 EXPERT LEGAL INSIGHTS

Recovery Loan Scheme (RLS) FAQs

Our FAQs set out the key questions that you may have about the Recovery Loan Scheme (RLS).

What is an RLS loan?

The Recovery Loan Scheme (RLS) was launched in April 2021 by the Government together with the British Business Bank to provide finance of up to £10m to businesses across the UK as they recover and grow following the Coronavirus pandemic. Loans, overdrafts, invoice finance and asset finance are all available as part of the scheme through over 60 accredited lenders. Similarly to the Coronavirus Business Interruption Loan Scheme (CBILS) (applications for which ended on 31 March 2021), these lenders include high street banks such as Santander, HSBC UK and NatWest but also challenger banks and smaller lenders. The full list of accredited lenders can be viewed through the British Business Bank website, which will be kept updated as new lenders are accredited.

Not every accredited lender can provide every type of finance available under the RLS, and the amount of finance offered varies between lenders. Borrowers should review each lenders’ website and/or contact the lender directly to find the right deal for them.

Term loans and asset finance facilities are available for up to six years and overdraft and invoice finance facilities are available for up to three years. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts.

The scheme provides the lender with a government-backed 80% guarantee against the outstanding balance of the facility but the borrower remains 100% liable for repayment of the facility. Unlike the CBILS and Bounce Bank Loan Scheme (BBLS), the Government does not cover the first 12 months’ interest payments or other lender levied fees.

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Can I apply for a RLS Loan?

To be eligible for the RLS scheme, your business must meet the following criteria:

  • It must be based in the UK
  • It must have a borrowing proposal which would be considered ‘viable’ by the lender
  • It must be able to self-certify that it has been adversely impacted by the Coronavirus pandemic

Businesses with an existing facility under the BBLS, CBILS or Coronavirus Large Business Interruption Loan Scheme (CLBILS) can still access the RLS, provided they meet the eligibility criteria.

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How much interest will be charged?

Interest rates and fees charged by lenders will vary and will depend on the specific lending proposal. Note that the borrower will be responsible for the interest payments itself from the outset (unlike the position under the BBLS and CBILS)

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What will happen if the loan cannot be repaid?

The lender may be able to enforce any security it has in place to recover the amounts outstanding. For RLS facilities of less than £250,000, the lender will not be permitted to ask for a personal guarantee.

For businesses borrowing more than £250,000, the lender may ask for a personal guarantee to be given but the amount recoverable under it will be limited to maximum of 20% of the outstanding balance, and the lender must apply the proceeds of the business assets first. In no circumstances can a borrower’s principal private residence be given as security for an RLS loan.

The government will cover 80% of the remaining balance after the business assets have been realised and the personal guarantee has been called upon. The lender will lose the remaining 20%.

This mirrors the position in relation to CBILS loans.

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What other finance options are available and how do they differ from the RLS?

The RLS replaces other Coronavirus loan schemes including the BBLS, the CBILS and the CLBILS which all closed their applications on 31 March 2021. Businesses already participating in one of these schemes can still apply for the RLS, although the amount they have borrowed under an existing scheme may limit the amount they may borrow under the RLS.

The key difference between the RLS and the loans available under the BBLS and CBILS, is that the borrower will need to fund the interest payments and other lender fees from the outset. However, as in relation to the other Coronavirus loan schemes, the Government backed guarantee available to lenders should mean that those businesses which have been adversely affected by the Coronavirus pandemic will have wider and quicker access to finance than may have otherwise been available to them.

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When will the RLS end?

At present, the British Business Bank is advising that the RLS scheme is open until 31st December 2021.

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If you would like any further information or advice about the issues above, please contact any member of our banking and finance team.

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