The Recovery Loan Scheme extended
The government has extended the Recovery Loan Scheme to help businesses access finance as they recover from the pandemic.
The Recovery Loan Scheme (RLS), originally launched to replace the Bounce Back Loan and CBILS schemes, has been extended until 30 June 2022. This extension provides continued support for businesses seeking finance to recover and grow following the disruption of the COVID-19 pandemic.
However, the terms of the scheme will change from 1 January 2022, making it slightly less generous but still a valuable option for businesses struggling to access commercial funding.
Changes to the scheme from 2022
From 1 January 2022, the government guarantee provided to lenders will be reduced from 80% to 70%. Furthermore, the maximum amount of finance available to a business will be reduced from £10 million to £2 million per business group.
Crucially, the scheme will also be restricted to small and medium-sized enterprises (SMEs) with a turnover of up to £45 million; larger businesses will no longer be eligible. These changes reflect a transition away from emergency pandemic support towards more standard commercial lending conditions.
How the RLS works
The RLS can be used for any legitimate business purpose, including managing cash flow, investment, and growth. Finance is available in the form of term loans, overdrafts, invoice finance, and asset finance. Unlike the Bounce Back Loans, there is no interest-free period; businesses must pay the interest and fees from the outset.
Because the government guarantee protects the lender (not the borrower), businesses remain 100% liable for the debt. Lenders will require a viable business plan and evidence that the business can afford the repayments before approving a facility.
Is the RLS right for your business?
If your business needs funding, the RLS is a useful avenue to explore, particularly if you lack the security required for a standard commercial loan. However, it is not the only option. Businesses should compare the terms of RLS facilities with standard commercial lending, asset finance, and equity investment to ensure they secure the most appropriate and cost-effective funding for their specific needs.
Disclaimer
The information contained in this article is for general guidance on matters of interest only. It should not be used as a substitute for consultation with professional accounting, tax, legal, or other competent advisers. Before making any decision or taking any action, you should consult a Kingscott Dix professional.