The Government has started the new funding scheme called the “Recovery Loan Scheme” (RLS) for those businesses to recover and grow.
Here is what you need to remember:
- This is financial support by Government for businesses who are genuinely affected by Covid-19.
- This loan is available for managing cash flow, investment and growth.
- You need to prove the affordability.
Please check if you have borrowed from these sources:
- the Bounce Back Loan Scheme (BBLS)
- the Coronavirus Business Interruption Loan Scheme (CBILS)
- the Coronavirus Large Business Interruption Loan Scheme (CLBILS)
This Recovery Loan Scheme (RLS) is still available if you have taken the above loans.
This is how it works:
Lenders
The Recovery Loan Scheme will initially be available through a number of lenders accredited by the British Business Bank. New lenders under the scheme will be listed on the British Business Bank website as they become accredited.
Please note: A key aim of the Recovery Loan Scheme is to improve the terms on offer to you, but if a lender can offer you the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.
When looking to borrow, you should first approach your own finance provider – ideally via its website. You may also consider approaching other lenders if you’re unable to access the finance you need.
Types of finance
A lender can provide up to £10 million as one of the following facilities: Term loan, Overdraft, Invoice finance, Asset finance and Guarantees.
RLS gives the lender a government-backed guarantee against the outstanding balance of the facility. As the borrower, you are always 100% liable for the debt.
If you’re borrowing £250,000 or less:
The lender won’t take any form of personal guarantee.
If you’re borrowing more than £250,000
The lender has the discretion to decide whether to take personal guarantees.
However:
- above £250,000, the maximum amount that can be covered under 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
- no personal guarantees can be held over Principal Private Residences.
Key features of the scheme
- Up to £10m facilities per business
- Guarantee to the lender to encourage lending
- Interest and fees to be paid by the business from the outset
The maximum amount of a facility provided under the scheme is £10m per business (maximum £30m per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts. The scheme gives the lender a government-backed guarantee against the outstanding balance of the facility.
- As the borrower, you remain 100% liable for the debt.
- Businesses are required to meet the costs of interest payments and any fees associated with the RLS facility.
- The annual effective rate of interest, upfront fee and other fees cannot be more than 14.99%.
Term length / Personal guarantees / Turnover limit
- For term loans and asset finance facilities: from three months up to six years.
- For overdrafts and invoice finance facilities: from three months up to three years.
- Personal guarantees are not permitted for facilities of £250,000 or less.
- Above £250,000 the maximum amount that can be covered under 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.
- No personal guarantees can be held over Principal Private Residences.
- There is no turnover restriction for businesses accessing the scheme.
Access to multiple schemes
Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme, although the amount they have borrowed under an existing scheme may in certain circumstances limit the amount they may borrow under RLS.
For more information, please follow this link
https://www.gov.uk/guidance/recovery-loan-scheme
If you need further information, please contact Sterling Finance as below
Tel 0161 339 4989
