Recovery Loan Scheme – open for applications

Launched today (6 April), the Recovery Loan Scheme (RLS) ‘provides financial support to businesses across the UK as they recover and grow following the coronavirus pandemic’.

Information on the RLS can be found at British Business Bank webpage.  Some key points are summarised below.

What is the RLS?

The RLS is similar in construct to the Coronavirus Loan Schemes (Bounce Back Loan Scheme, CBILS and CLBILS) in that it is a scheme that gives the [accredited] lender a government-backed guarantee against [80%] the outstanding balance of the facility.

“It is designed to appeal to businesses that can afford to take out additional debt finance and can be used for any legitimate business purpose, including managing cashflow, investment and growth”

“A key aim of the Recovery Loan Scheme is to improve the terms on offer to you, but if a lender can offer you the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.”

The scheme went live on 6 April and is open until 31 December 2021, subject to review.

Finance/ facilities supported through the RLS

Key features of facilities supported by the RLS include:

In terms of size of facility the FAQs for the scheme state that the maximum value of a facility per business is the lesser of:

• £10m; or
  • double the businesses wage bill for 2019 or last year available
  • 25% of the applicant’s turnover in 2019, or
  • the applicant’s liquidity needs for the coming 12 months (for large enterprises) or 18 months (for SMEs)

If a business, or any of its linked or partner enterprises (including private equity and venture capital linked enterprises), have borrowed under CBILS or CLBILS then this will count towards a business’ maximum amount

Eligibility

Your business must:

1. have been impacted by Covid-19 – you will need to confirm to the lender that you have been impacted by the coronavirus pandemic
2. be carrying out trading activity in the UK
3. have a viable business proposition – your lender may disregard (at its discretion) any concerns over short-term to medium-term business performance due to the uncertainty and impact of Covid-19

There is no turnover restriction for businesses accessing the scheme.

To assess (3) above, and specifically to show that you can afford to repay the RLS-backed facility, the British Business Bank state you’ll need to provide certain evidence, and this is likely to include the following:

• Management accounts
• Business plan
• Historic accounts
• Details of assets

Decision-making on whether a business is eligible for RLS is fully delegated to the British Business Bank’s accredited RLS lenders (see further below).

When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders.

Accredited Lenders and application process

The Recovery Loan Scheme will initially be available through a number of lenders accredited by the British Business Bank. New lenders under the scheme will be listed on the British Business Bank website as they become accredited.

When looking to borrow, the British Business Bank advise “you should first approach your own finance provider – ideally via its website. You may also consider approaching other lenders if you’re unable to access the finance you need.”

PKF Francis Clark

We will be modifying the template we used for CBILS for RLS applications and hope to have this available in due course to share with businesses looking to make a RLS application.

We anticipate working with a number of our clients to make applications to this scheme, particularly those with robust growth aspirations but a lack of available security.

We will look to keep this blog up to date with relevant updates about RLS as we find out more through going through the application process with our clients.