Recovery Loan Scheme (RLS) Re-Launched for SMEs

By Kate | February 15, 2023

The Recovery Loan Scheme has entered a new phase to provide SMEs with easy access to finance to invest in their business’s growth. This revised scheme is planned to run until 2024, has replaced CBILS and Bounce Back Loans, and is still open to eligible businesses that have already taken out government-backed finance. For most, there is also no requirement to confirm that the Covid-19 pandemic affected their business. Carry on reading to find out more, or contact us today for further advice.

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What is a Recovery Loan?

A Recovery Loan gives small and medium sized businesses access to finance of up to £2 million, that they can use for business purposes, including working capital or investment.

Recovery Loan Eligibility

You will be eligible for a loan if:

Your business is trading in the UK,
Is viable and not in difficulty (e.g., not currently in insolvency proceedings),
And has a turnover of £45 million or less.

Even if your business received support from earlier Covid-19 loan schemes, and earlier phases of the RLS, it can still access finance under this revised scheme (as long as all other eligibility criteria is met).

Businesses from any sector can apply, except:

Public sector bodies
Banks and building societies
Insurers and reinsurers
State schools

For charities and further education colleges to be eligible, they must confirm they have been impacted by the pandemic, and generate not more than 50% of their turnover from trading activities.

Recovery Loan Terms

The RLS finance options are as follows:

Term loans or overdrafts: between £25,001 and £2 million per business group
Invoice or asset finance: between £1,000 and £2 million per business group

For businesses in scope of the Northern Ireland Protocol, the max is reduced to £1 million for both options.

The facility’s maximum length depends on the finance type, with both offering affordable monthly payments:

Loans and asset finance: up to six years
Overdrafts and invoice finance: up to three years

Lenders will consider whether your business’s proposition is viable, but will disregard any concerns over the short and medium term impact of the pandemic. They can still take personal guarantees, but a borrower’s Principal Private Residence (e.g. the family home), cannot be taken as a security. So, if your business were to default on the loan, your home is secure.

You can pay back the loan at any time – your lender will provide you with a settlement fee, which you can pay directly.

How a Recovery Loan Compares to Other Options

The government backs 70% of a Recovery Loan, which means that if your business wasn’t able to repay, the government carries some of the risk. This allows finance to be offered to a wider range of companies, and at lower, more competitive rates.

However, please be aware that the actual rate offered can vary based on credit history and trading circumstances – so in some cases, traditional business loans may be more suitable.

Need Advice on the Recovery Loan Scheme?

Looking to take out a Recovery Loan? We can help you understand the options available to you, from terms and repayment lengths, to whether it’s the right type of finance for your business. Please contact us today through our online form, call 01743 562430, or email hello@mercianaccountants.co.uk.