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Recovery Loan Scheme: Facts and misconceptions

The Recovery Loan Scheme (RLS), the follow-up to the BBLS, CBILS and CLBILS, launched on 6 April. Running until 31 December 2021, it’s designed to provide businesses of any size with finance for recovery and growth as we emerge from the lockdown.

Recovery Loan Scheme: Facts and misconceptions
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  • Thomas Boyd
  • July 06, 2021
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There are 45 RLS-accredited lenders currently offering finance through the scheme.

To equip you with the knowledge you need to support your clients to help them make the right decision, we’ve compiled some of the key things you need to know about the scheme.

First, let’s take a look at a few common misconceptions.

5 common RLS misconceptions

1. CBILS lenders are automatically accredited for the RLS

This is incorrect. Lenders must undergo another accreditation process for the RLS, and some CBILS lenders may decide not to lend through the newer scheme.

In the first instance, high street lenders were prioritised for accreditation. Since then a range of lenders have become accredited, including specialist, non-bank lenders.

2. RLS facility interest rates are the same as the CBILS

This is another misconception. It’s important for your clients to understand that unlike the CBILS, where the Government covered the first 12 months of interest payments, they will have to cover all costs associated with their loan from the start.

Interest rates vary from lender to lender. One thing we do know is that the annual effective rate of interest, upfront fee and other fees can’t exceed 14.99 per cent.

3. Those in receipt of finance through the CBILS, BBLS or CLBILS aren’t eligible for an RLS facility

This isn’t strictly true – depending on how much they received through another scheme, your client can still apply for an RLS facility. The amount they are eligible for could be limited.

4. Only clients with over 2 years trading history are eligible

The RLS is being offered to businesses of any size and there’s no minimum trading or turnover threshold to meet. Eligibility criteria does apply, but it’s worth noting that each individual lender has their own eligibility criteria.

Recovery Loan Scheme a recap

If your clients’ business has been affected by the pandemic, they can apply for RLS finance.

The funding can be used for any legitimate business purpose, such as investment, growth and to manage cash flow. Up to £10 million is available (£30 million maximum per group).

RLS finance falls into four categories:

  • Term loan Starting at £25,001, term length three months up to six years.
  • Overdraft Starting at £25,001, term length three months up to three years.
  • Invoice finance Starting at £1,000, term length three months up to three years.
  • Asset finance Starting at £1,000, term length three months up to six years.

Personal guarantees

The borrower is 100 per cent liable for the debt, and RLS lenders receive a government-backed guarantee for the facility’s outstanding balance. Your client won’t be asked to provide a personal guarantee if they’re borrowing less than £250,000.

If they’re borrowing over £250,000 they could be required to provide a personal guarantee at the lender’s discretion.

However, the maximum amount that can be covered under RLS is capped at a maximum of 20 per cent of the outstanding balance of the RLS facility after the proceeds of business assets have been applied.

Note that personal guarantees can’t be held against Principal Private Residences under the RLS.

What your clients need to apply

Your client will need to show the lender that they can repay the facility. It’s likely that they’ll be asked to provide management accounts, a business plan, historic accounts and details of any assets. It’s completely up to the lender to decide whether they’re eligible or not.

Exploring alternatives to the RLS

While the goal of the RLS is to provide UK businesses with improved terms, some lenders might be able to offer your client a non-RLS facility on better terms.

If this is the case, they should do so, according to the British Business Bank.

That’s why it’s always worth consulting a Business Finance Expert – someone who has access to the entire business finance market, and who can match your client with an appropriate facility based on their needs and circumstances.

At Funding Options, by combining our market expertise with innovative technology, we’re able to search the market to find the right funding for businesses operating in any sector.

Join Connect to help your clients apply for RLS finance

Funding Options processed over £760M in CBILS facilities and we’re continuing to help businesses access both RLS and non-RLS finance from reputable UK lenders.

Join our advisory platform, Connect, to ensure your clients can access the finance they need to continue to trade and grow with confidence throughout the recovery period.

Your client might be eligible for RLS finance or they may find that they can get better rates with a non-RLS facility.

Our experienced Business Finance Experts will help throughout the process, from application to when your client receives the funds.

To begin the process your client will be asked to share some basic information on how much they need to borrow and how quickly they need funding.


Thomas Boyd, head of advisory at Funding Options

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