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Understanding the Recovery Loan Scheme

After a year with so many challenges for UK businesses across the spectrum, the British Business Bank has now launched the new Recovery Loan Scheme.

This programme aims to help British businesses recover from the pandemic, with borrowing available up to £10 million per business or £30 million for groups.

Companies can apply for a wide range of reasons, such as:

  • Shoring up cash flow.
  • Investing in new projects.
  • Financing growth schemes.

In this guide, the Revolution Brokers team explains what the Recovery Loan Scheme is and how it could be helpful for property businesses and investment professionals looking to rebuild profitable operations.

What is the Recovery Loan Scheme - and Who Is It For?

The Recovery Loan Scheme replaces three other finance programmes for UK businesses that have now come to an end:

  • Bounce Back Loan Schemes
  • Coronavirus Business Interruption Loan Schemes
  • Coronavirus Large Business Interruption Loan Schemes

Each of these funding initiatives has now closed to new applicants, and so the Recovery Loan Scheme has started accepted applications from 6th April 2021. Applicants can request anything from £1,000 to £10 million depending on the size of the business and what sort of financial product they are looking for.

Companies can apply directly to their bank, provided it is participating in the programme, and the business is liable for 100% of the debt. However, the government will give a guarantee of up to 80% of the value.

There is no interest-free period, so the interest and lender fees will need to be budgeted.

However, the eligibility criteria are flexible, so businesses don’t need to meet any minimum or maximum turnover. Credit assessment processes apply as usual.

A business will need to show that they:

  • Have a viable business - or a business that would have been viable before the pandemic.
  • Have been impacted by the pandemic.
  • Are not under insolvency proceedings or a part of collective insolvency proceedings.

Any businesses that have already received financial support through one of the pre-existing loan schemes are still eligible to apply to the Recovery Loan Scheme, provided they meet all of the criteria. The other loan values are taken into account in their application proposals.

Which Banks are Accepting Recovery Loan Scheme Applications?

Enrolled lenders offering Recovery Loan Scheme products include:

  • Aldermore
  • Barclays
  • Bank of Scotland
  • Clydesdale Bank
  • Santander
  • Secure Trust Bank
  • Lloyds Bank
  • NatWest
  • Paragon
  • Royal Bank of Scotland
  • Oak North Bank
  • HSBC
  • Yorkshire Bank
  • Ulster Bank
  • Ebury
  • Danske Bank
  • Skipton Business Finance

What are the Terms of the Recovery Loan Scheme?

To illustrate the terms on offer, let's take a look at the Coronavirus Business Interruption Loan Scheme, directly compared to the Recovery Loan Scheme:

Term

CBILS

RLS

Values available

From £50,000 to £5 million

Up to £10 million

Length of the term

Six years max

Six years max

Government support

Payment for the first year's interest plus lender fees

None

Government guarantee

80%

80%

Minimum trading requirement

One to two years minimum

None

Turnover restrictions

None

None

Other terms

No personal guarantees allowed on loans up to £250k

No personal guarantees allowed on loans up to £250k

The initial Recovery Loan Scheme application period runs between 6th April and 31st December 2021, which may be extended further.

Facilities on offer covered by the scheme include loans, overdrafts, asset finance and invoice finance. There are many funding options, not restricted purely to financial loans with a fixed repayment term.

Banks are encouraged to offer Recovery Loan Scheme products if there is a viable benefit for the business, and a feasible plan is in place, but where they wouldn't have considered offering the facility on similar terms to those available through the initiative.

Likewise, if a bank would have offered a similar facility but at higher prices or interest rates, they can offer the Recovery Loan Scheme as a more affordable alternative, with the lender benefiting from the 80% government guarantee.

Can Private Landlords Apply to the Recovery Loan Scheme?

It's no secret that many investors and rental landlords have suffered a financial hit in the last year - and there are very many potential reasons for property companies to be keen to seek capital injections to ensure 2021 is as buoyant as possible.

Examples include:

  • Long periods of reduced or zero rental income due to the financial impact of the pandemic on tenants.
  • Lack of holiday rental income due to travel restrictions.
  • Delays to development, conversions or renovation projects due to the inability of workforce members to be on-site collectively or to work at all.
  • Problems caused by delays to viewings or valuations.

Provided the landlord operates their business as an incorporated company, they can apply for a Recovery Loan Scheme facility.

That might be through a loan; they could opt for an overdraft or use asset finance to leverage capital value held in housing stock that could raise much needed funds against the equity held in properties.

Businesses from any sector can apply, so there is no limitation on which industries are eligible, provided they can demonstrate the impact of the pandemic and have a viable business proposition and security.

If you are interested in learning more about the Recovery Loan Scheme or other initiatives and refinancing alternatives available to support property businesses and commercial development projects, please contact the Revolution Brokers team on 0330 304 3040 or message us at info@revolutionbrokers.co.uk.

Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.

Author

Almas Uddin

FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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