recovery loan scheme helping a business how suffered because of covid

Understanding the Recovery Loan Scheme 2024

The government’s Recovery Loan Scheme (RLS), which supports UK businesses with lending of up to £ 2 million, will now run up to June 2024.

The latest Iteration of the Recovery Loan Scheme

The new Recovery Loan Scheme (RLS), which the British Business Bank runs on behalf of the Department for Business, Energy, & Industrial Strategy (BEIS), will continue until 2024.

It helps UK businesses get the money they need to invest and expand. 

The UK Government started RLS in April 2021 to help UK businesses get financial help as they recover from COVID-19. The original plan was to run until the end of 2021, pending a review.

During the Autumn Budget 2021, the government confirmed it would extend the program until June 2022.


From Finance Nation

A word from Matt 

"Businesses no longer need to show they were impacted by COVID-19 to get the new Recovery Loan Scheme. Because of this, many businesses are looking to the RLS to better manage cash flow, investment, and growth. If your company has previously made use of CBILS, it would be beneficial to also consider the ongoing RLS program." - Matt Knight 

Understanding the Recovery Loan Scheme (RLS)

The Recovery Loan Scheme (RLS) helps UK businesses get financial support. The old RLS ended on June 30, 2022.

It assisted UK businesses in obtaining funds to recover from the effects of the COVID-19 pandemic.

The newest version of the assistance program will begin in August 2022 and last for two years. Businesses no longer need to demonstrate the impact of COVID-19 in order to receive help.

Businesses use RLS to manage cash flow, investments, and growth

It is available to a wide range of businesses, including those that have used CBILS, CLBILS, or BBLS in the past.

RLS is a new loan scheme that replaced CBILS, CLBILS, and BBLS. These schemes stopped accepting new applications on March 31, 2021.

The Recovery Loan Scheme helps UK businesses by offering improved loan terms with a 70% government guarantee for lenders.

Some businesses may find better loan terms or other types of lending options like commercial mortgages, Asset Finance or Bridging loans by signing up with Finance Nation.

When did the Recovery Loan Scheme start and when does RLS end?

RLS launched on 6 April 2021 and the latest version will close in 2024. The RLS program was originally set to end in 2021.

However, the Treasury has decided to extend it until June 30, 2022. This extension comes with reduced funding for businesses and a lower government guarantee.

In July 2022, the government confirmed a two-year extension of the program.

What businesses qualify for this?

From January 1, 2022, only small and medium-sized businesses can access the Recovery Loan Scheme. The government announced this change in the Autumn Budget 2021.

At the time of its inception, businesses in the UK, regardless of their size, were eligible to apply for a loan or an overdraft. The Recovery Loan Scheme (RLS) is different from previous coronavirus finance schemes like BBLS, CBILS, and CLBILS.

Companies must fulfil specific requirements to be eligible for the program. Specifically, a company must:

  • Have revenues of under £45 million

  • Be conducting business operations within the UK

  • Be bankable and viable. The business had difficulties because of Covid-19 but now needs to show it can trade well in the future.

  • Not be in collective insolvency proceedings or any other business difficulty.

If a lender can offer finance on normal commercial terms without using the scheme, they may do so.

Three more things to be aware of:

  • Lenders must check credit and fraud for all Recovery Loan Scheme applicants. The checks and process differ depending on the lender.

  • Lenders can ask for personal guarantees, but they cannot use Principal Private Residences as collateral in this scheme.

  • If a lender can provide financing without using the scheme, they should do so on regular commercial terms.

If my Business has already taken a Bounce Back Loan or CBILS Loan can I still apply for the Recovery Loan Scheme?

Yes. Businesses can get finance through the Recovery Loan Scheme (RLS) even if they borrowed money before from BBLS, CBILS, or CLBILS. 

Some businesses may be able to borrow more money through the RLS than they could before. 

The amount they can borrow depends on the lender's evaluation and the criteria of the scheme. Some might have a lower borrowing capacity.

What is the borrowing limit for each company?

Starting on January 1, 2022, businesses can borrow up to £2 million under the updated Recovery Loan Scheme. 

You can use this money for various types of borrowing, such as term loans, overdrafts, invoice finance, and asset finance.

The most money you can borrow through the Recovery Loan Scheme is £2 million until 2024. 

This limit applies to borrowers who are not protected by the Northern Ireland Protocol. Currently, those covered by the Northern Ireland Protocol have an upper limit set at £1 million.

The smallest facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

What is the rate of interest?

The British Business Bank sets a limit of 14.99% for the total cost of interest and fees charged annually.

Lenders will determine the rate they offer based on your specific business circumstances.

When do businesses need to pay the money back?

Term lengths depend on the type of finance (product) you choose.

Businesses can borrow:

  • Up to six years for term loans and asset finance facilities (minimum three months).

  • Up to three years for overdrafts and invoice finance facilities (minimum three months).

How does the Recovery Loan Scheme differ from the schemes it replaces (i.e. BBLS, CBILS and CLBILS)?

There are two key differences:

  • Interest and Fees - Under the Recovery Loan Scheme, you need to pay interest and fees immediately. The British Business Bank no longer covers them for the first 12 months.

  • Loan Amount - The upper limit for loan size is set at £2m for borrowers not covered by the Northern Ireland Protocol. In August 2022, they set the maximum at £1 million for those within the scope of the Northern Ireland Protocol. (The maximum loan amount was previously £10m for applications made before the end of 2021).

What is the UK government guarantee?

The UK Government initially promised to cover 80% of loans under the Recovery Loan Scheme until the end of 2021. The government's guarantee for applications submitted on or after 1 January 2022 was lowered to 70% in the Autumn Budget 2021. The updated plan was revealed in the budget. This 70% will continue to be available for applications until the program ends in 2024.

If a business is unable to repay the loan, the lender can receive 70% of the loan amount from the government. For applications submitted before December 30, 2021, the lender can receive 80% of the loan amount from the government.

This guarantee provides protection for lenders in case the borrower defaults on the loan. This guarantee gives lenders confidence and added protection when lending to businesses. As the borrower, you are always 100% liable for the debt.

What can you use the funds for?

Companies that are approved for the Recovery Loan Scheme funding can utilise it for any valid business-related purpose, such as:

  • Cash flow management
  • Procurement of equipment
  • Covering a one-time expense
  • Assisting with payroll
  • Investment in areas like marketing
  • Business expansion.

Is it possible for a business to refinance a BBLS or CBILS loan, partially or fully?

Yes, companies with total financing requirements (including any increment) exceeding the minimum facility sizes offered under RLS, have the option to refinance their BBLS or CBILS loan with a Recovery Loan prior to 2024, when RLS will stop accepting new applications.

Businesses seeking to refinance must submit new applications for RLS and meet the scheme's eligibility criteria. Companies have the option to either restructure their financing through their current lenders or seek out a new approved lender.

If a business refinances a BBLS or CBILS loan under RLS, it will lose any remaining Business Interruption Payment (BIP) entitlement. You can do this within 12 months from when you took out the original loan.

Companies with a Bounce Back Loan can refinance under RLS, but borrower protections and qualifications are different for each program.

The maximum amount a company can borrow from the RLS depends on two factors. These factors are the lender's assessment of the company's ability to repay and the scheme's guidelines.

Any additional funds obtained through refinancing are also included in this calculation. This includes any extra money borrowed by refinancing.

Is it possible for businesses with poor credit to obtain a Recovery Loan?

Yes, but it can be challenging. As you would expect, businesses with bad credit have fewer loan options and usually get charged a higher interest rate.

Certain businesses that were previously refused credit can now apply for the Recovery Loan Scheme. Lenders evaluate each application individually, assessing it on a case-by-case basis.

If you are unable to use RLS for your business, consider exploring alternative financing options such as a business loan. Register with Finance Nation to understand your options.

Is the Recovery Loan Scheme available to sole traders?

Indeed, sole traders were eligible to apply for the Recovery Loan Scheme.

Actually, provided a business meets the other qualifying conditions, RLS is accessible to:

  • sole traders
  • corporations
  • limited partnerships
  • limited liability partnerships
  • co-operatives and community benefit societies
  • any other legal entity conducting business operations in the UK through a business account.

Businesses need to earn more than 50% of their income from selling goods or services in the UK. This rule does not apply to registered charities or educational institutions.

Who are the participants in the recent Recovery Loan Scheme?

The Recovery Loan Scheme concluded on June 30, 2022. The British Business Bank approved over 80 lenders for the previous RLS.

At present, 18 lenders have been accredited under the new version. This list is managed by the British Business Bank and is likely to fluctuate until the scheme's end in 2024. The following lenders have been accredited under the new version of RLS:

  • Atom Bank
  • Bank of Scotland
  • Barclays
  • BCRS Business Loans
  • Business Enterprise Fund
  • CWRT
  • DSL Business Finance Ltd
  • Finance For Enterprise
  • First Enterprise (Enterprise Loans)
  • FSE Group
  • Genesis
  • Let’s Do Business
  • Lloyds Bank
  • NatWest
  • Robert Owen Banking
  • RBS
  • Time Finance.

Since there are so many lenders available, using a finance broker like Finance Nation is a great way to save time whilst making sure you're getting the best rates and fees possible.

If you're keen to get started, book a call with us now and we'll work out your next best step forward.

When was the RLS launched?

Rishi Sunak, then Chancellor, introduced the Recovery Loan Scheme in March 2021. He later extended the scheme for six months in October 2021 and on 20 July 2022, the government declared a further two-year extension.

What other financial programs supported by the government are accessible to businesses after COVID-19?

The government began the Future Fund: Breakthrough with £375bn in July 2021, and also introduced the Recovery Loan Scheme for businesses. The government is investing in fast-growing companies focused on research and development through a new fund.

These companies are receiving financial support to help them expand and innovate. The fund aims to promote economic growth and technological advancement by supporting these emerging businesses.

If you believe a loan is the most suitable choice for your business at this moment, or if you're exploring other lending options like invoice finance, asset finance, or a revolving credit facility, continue your search - don't lose hope!

If you require assistance in understanding the available options, your initial step should be to sign up with Finance Nation. We can then pair you with the most appropriate funding alternatives. We're also able to assist you with equity and grants, as well as help you save on routine expenses such as business bank accounts.

Our funding managers are available to answer any queries you may have about financing options - reach out to us here.

Is a credit check required for the application?

Indeed, credit and potentially fraud checks will be conducted by lenders. The nature of these checks can differ among lenders.

If you were previously denied credit, you may still qualify for a business recovery loan.

Guidelines for Applying to the Recovery Loan Scheme

  • It's crucial to have a well-defined purpose for the loan and incorporate this into your business plan.

  • Along with a business plan, you must assemble other necessary documents prior to submitting your application. For instance, you should organise management accounts, financial accounts, and details regarding any business assets. This documentation can be used by Finance Nation (and lenders) to ensure your loan is both affordable and feasible.

  • Instead of applying directly to a lender, we recommend using Finance Nation for your application. Our Funding Managers can find the best borrowing options and match you with the most suitable lender for your business. We'll spare you the hassle of reaching out to numerous lenders, thus aiding you in reducing the number of credit checks.

  • Contrary to previous COVID-19 loans, the British Business Bank is not covering the initial year's interest and fees. Ensure these expenses are accounted for in your projections.

Mistakes to avoid when making an application

  • Term loans and asset finance last up to six years, while overdrafts and invoice financing last up to three years. If you fail to align the financing you're seeking with your cash flow requirements, you may encounter difficulties.

  • Avoid taking on a loan that exceeds your financial capacity.

  • You need to make a plan to repay your loan. This is especially important if you have promised to pay back the loan yourself. The lender cannot use your home as collateral.

  • Ensure that your cash flow forecasts are current and practical. It's beneficial to put your projections through stress testing. This will help you determine if you can still repay a loan. This is important in case your business doesn't perform as well as anticipated.

  • Many lenders offer different types of loans, but some have restrictions on who they lend to. Make sure you apply for the correct financing from the right lender to avoid wasting your time. At Finance Nation, we know all the products available, saving you time to focus on your business.

  • Avoid high interest rates to prevent getting stung! If one lender rejects your loan, another lender may offer you a loan with higher interest rates. It's better to apply through Finance Nation instead of applying directly to many lenders for this reason.

What actions should I take if my application for the Recovery Loan Scheme has been declined by lenders?

If you believe that a loan is the most suitable solution for your business at this moment – or if you're exploring other lending options like invoice finance, asset finance, or a revolving credit facility, continue your search – don't lose hope!

If you need help finding funding options, start by signing up with Finance Nation. We will help you navigate and find the best options for you. We're also able to assist you with equity and grants, as well as helping you save on routine expenses like business bank accounts.

Finance Nation - Here to Help

If you're considering debt restructuring but unsure where to start, Finance Nation is here to help.

Their knowledgeable experts can guide you through the process, securing the most advantageous deal tailored to your financial objectives.

By leveraging their expertise, you can reduce costs, optimize your borrowing, and pave the way for sustainable financial growth.