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Recovery Loan Scheme (RLS) Launches

Business Finance, Industry News

Recovery Loan Scheme launches 

Recovery has been the word on the lips of business owners up and down the country. Today, the Recovery Loan Scheme (RLS) launched with an initial panel of 18 accredited lenders allowing businesses to access funds to kickstart their year. RLS is scheduled to run until 31 December 2021.

We are pleased to say we have existing relationships with the majority of those accredited so far and with more lenders coming on board in the next few weeks, we are confident of being able to access the best of facilities and rates available.

The general feeling in the broker community at present is underwhelming with little obvious to recommend it to clients as, unlike the CBILS product, the cost of the loan has to be covered from Day 1 and loan costs seem to be the same as any other standard facility. The cost of the loan is capped at 14.99% per annum with a maximum 5% arrangement fee but as this is way above the cost per annum for most Tier 1 and Tier 2 lenders this won’t tend to affect their lending.

It is hoped that lenders will enter the spirit of the scheme – recovery – and underwrite based on a clients’ performance before the lockdown and use projections to show affordability for further borrowing but as few deals have been assessed to date this is yet to be seen. With lenders unable to take PG’s they may continue to underwrite cautiously based on their potential to lose 20% of their monies lent out.

These factors mean that we would advise, more than ever, to consult a specialist regarding accessing these facilities. We are more than happy to discuss your requirements with no obligation. Get in touch here.

Up to £10m facility 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.