- What is the Recovery Loan Scheme (RLS)?
- What are the key features of RLS?
- Am I eligible?
- How do I apply?
- When will the scheme be accessible?
- Which products are available under RLS?
- How much can I apply for?
- What term can I borrow this over?
- What can an RLS facility be used for?
- What are the exact terms?
- What fees and interest rate can I expect?
- Can Personal Guarantees be taken under the scheme?
- Are businesses with CBILS/CLBILS/BBLS facilities eligible for RLS?
- Am I able to access RLS if I have accessed one or more of the Pay As You Grow repayment options under the Bounce Back Loan Scheme?
- Can a business benefit from multiple facilities across different product variants?
- Can a business refinance their BBLS/CBILS/CLBILS facility, in part or in full?
- Can RLS be used to refinance an existing commercial facility?
- What types of businesses are eligible?
- Is the scheme available for all sectors?
- Is the scheme appropriate for start-ups?
- Can companies that have received support from the Enterprise Investment Scheme (EIS) apply for RLS?
- What is the definition of a borrower’s group?
- Will applicants be required to pass the EU’s ‘undertaking in difficulty’ test?
- How do I know whether I am in scope of the Northern Ireland Protocol?
- What test applies to businesses not in scope of the Northern Ireland protocol?
- What is the EU ‘undertaking in difficulty’ test?
- How many lenders are accredited for RLS, and how can I find them?
- I am not an existing customer of any of the participating lenders. Can I still apply?
- What supporting documents might I need to apply?
- What checks will I be subject to?
- Do I need to provide evidence that I have a viable business?
- When do I start repayments?
- Will details about my loan be made publicly available?
- What is the difference between this new scheme and CBILS/CLBILS/BBLS?
- What changes have come into effect from 1 January 2022?
- Can businesses still access CBILS/CLBILS/BBLS?
What is the Recovery Loan Scheme (RLS)?
RLS aims to help businesses of any size across the UK affected by Covid-19, providing support for businesses to recover and grow following the disruption of the pandemic. 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.
What are the key features of RLS?
RLS guarantees a wide range of products, covering term loans, overdrafts, asset finance and invoice finance facilities. Businesses can borrow up to a maximum of £2 million, available on repayment terms up to six years (for term loans and asset finance) and up to three years (for overdrafts and invoice finance facilities) .
Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Businesses will be required to meet the costs of interest payments and any fees associated with the facility from the outset.
Lenders will be required to undertake their standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term business performance owing to the pandemic. The checks and approach may vary between lenders.
The scheme provides the lender with a government-backed 70% guarantee against the outstanding balance of the facility. The business remains 100% liable for repayment of the facility.
Am I eligible?
The scheme is open to most businesses who meet the eligibility criteria.
A business with an existing facility under either the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) or the Coronavirus Large Business Interruption Loan Scheme (CLBILS) can still access the new scheme, providing it is eligible, although the amount they have borrowed under a previous scheme may in certain circumstances limit the amount they may borrow under RLS.
To be eligible for a facility under the Recovery Loan Scheme, a business must meet certain eligibility criteria including but not limited to:
- Being able to self-certify that it has been impacted by Covid-19;
- Being UK-based in its business activity and generate more than 50% of its turnover from trading activity (registered charities and further education establishments are exempt from this requirement);
- Being engaged in trading activity in the UK and have the core of its business operations in the UK;
- Having a turnover not exceeding £45m per annum; Having a borrowing proposal which would be considered viable by the lender. In making their assessment, lenders may, but are not required to, disregard any concerns over a business’s short-to-medium term business performance due to the uncertainty and impact of Covid-19;
- Not being in collective insolvency proceedings. If the applicant is in scope of the Northern Ireland Protocol then (i) for micro and small enterprises the business was not subject to collective insolvency proceedings or in receipt of rescue aid; or (ii) for other businesses that are not micro and small enterprises they are not an “undertaking in difficulty”, as defined by the EU; and
- Not being a bank/ building society; an insurer or reinsurer (can be an insurance broker); a public-sector body; a state funded primary or secondary school; or an individual other than a sole trader or a partner acting on behalf of a partnership.
- If a lender can offer finance on normal commercial terms without the need to make use of the scheme, they may do so.
How do I apply?
RLS is available through the British Business Bank’s accredited lenders, which are listed on the RLS Accredited lenders page.
In the first instance, you should approach your usual lender– ideally via their website. You may also consider approaching other lenders if you are unable to access the finance you need.
Decision-making on whether you are eligible for RLS and whether it is suitable for you is fully delegated to the accredited RLS lenders. These lenders range from high street and challenger banks to asset-based lenders and smaller specialist local lenders.
When will the scheme be accessible?
At Autumn Budget 2021, the government announced that the Recovery Loan Scheme will be extended by six months to 30 June 2022.
Which products are available under RLS?
RLS supports a wide range of business finance facilities, covering term loans, overdrafts, asset finance, and invoice finance.
Not every lender can provide every type of finance listed. RLS is available through the British Business Bank’s accredited lenders, which are listed on the RLS Accredited lenders page.
How much can I apply for?
Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
The maximum value of a facility per business is the lesser of:
- £2m; or
- Either (i) double the businesses wage bill for 2019 or last year available , (ii) 25% of the applicant’s turnover in 2019, or (iii) the applicant’s liquidity needs for the coming 12 months (for large enterprises) or 18 months (for SMEs). Please note that:
- Lending decisions are fully delegated to accredited lenders. Lenders can chose which of the three options (i), (ii) or (iii) to use in deciding a business’ maximum eligible amount.
- 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.
The maximum a business can borrow is also subject to a limit of £6m per borrower group, where applicable. In this instance, private equity and venture capital linked businesses are disregarded for the purposes of defining a business group.
If a borrower has an RLS facility of £2 million or more outstanding (or a borrower group has an RLS facility with £6 million or more outstanding), they will not be permitted to borrow additional amounts under the Scheme.
What term can I borrow this over?
Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years.
What can an RLS facility be used for?
An RLS facility can be used for any legitimate business purpose including, but not limited to, managing cashflow, or for investment and growth purposes.
What are the exact terms?
Lenders are responsible for providing finance, supported by the guarantee. The exact terms of each facility will be determined by your lender and will depend on the circumstances of your borrowing proposal. All lending decisions are at the discretion of lenders.
What fees and interest rate can I expect?
Interest rates and fees charged by lenders will vary and will depend on the specific lending proposal, but lenders are required to pass on the economic benefit of the guarantee on to borrowers after taking costs into account including the scheme lender fee.
Please speak to your lender, who will be able to give you full details on what interest rates will be payable.
Can Personal Guarantees be taken under the scheme?
For RLS facilities for £250,000 or less, personal guarantees cannot be taken by lenders in relation to the facility.
For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but no recovery action can be taken over a Principal Private Residence and recoveries are capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied.
A worked example to show what this means in practice:
- Business borrows £1 million facility.
- Business pays off £400,000, then defaults, owing £600,000.
- Lender recovers £100,000 from other business assets secured, such as a debenture (e.g. stock), leaving £500,000 outstanding.
- Call on personal guarantee is £100,000 (20% of the outstanding balance, not the full £500,000), leaving £400,000 as a loss to the lender.
Are businesses with CBILS/CLBILS/BBLS facilities eligible for RLS?
Yes. Businesses with CBILS, CLBILS and BBLS facilities can access RLS, providing they meet the eligibility criteria for RLS and any additional lending is considered affordable by the lender.
Yes, subject to meeting the Scheme eligibility criteria. Pay as You Grow is designed to alleviate borrowers’ financial difficulty, even before it arises, by giving borrowers flexibility in meeting their repayment obligations. Using Pay as You Grow will not affect a borrowers’ credit rating, but it may affect lenders’ future creditworthiness assessments. For example, when considering a request for additional funding a lender will take into consideration incomings and outgoings, including existing debt repayments such as the Bounce Back Loan Scheme facility. It will also consider a business’s total debt exposure, which will again include the outstanding Bounce Back Loan Scheme facility. More information on Pay As You Grow is available.
Decision-making on whether a business is eligible for RLS is fully delegated to the accredited RLS lenders.
Can a business benefit from multiple facilities across different product variants?
Yes, subject to meeting the scheme eligibility requirements and provided they do not borrow more than the maximum amount they are entitled to. The maximum amount a business can borrow across different facilities and schemes, will depend on a lender’s assessment of affordability and scheme requirements.
Can a business refinance their BBLS/CBILS/CLBILS facility, in part or in full?
Yes, where total financing needs (including any increase) are greater than the minimum facility sizes available under RLS.
Any re-financing will be considered as a new application for RLS, so will be subject to meeting the Scheme eligibility criteria. Re-financing can be sought with your existing lender or a different accredited lender.
There is no Business Interruption Payment (BIP) under RLS and therefore, any partial or full re-finance of a BBLS or CBILS facility will require any remaining BIP entitlement (up to a maximum of 12 months from the outset of the original facility) to be foregone as part of the re-financing process.
Existing BBLS borrowers are able to refinance under RLS, however, borrower protections and scheme eligibility/ terms under these schemes differ. Businesses should first discuss with their lender.
The total amount a business can borrow, including any additional lending sought as part of the re-financing of an existing facility will depend on a lender’s affordability assessment and Scheme requirements.
Can RLS be used to refinance an existing commercial facility?
Businesses can, in certain circumstances, use an RLS facility to refinance existing debt where total financing needs (including any increase) are greater than the minimum facility sizes available under the Scheme. For example, where a business is seeking to put itself on a more stable financial footing and/ or improve its working capital position, then, in principle, a RLS facility could be provided, providing the business fulfils the Scheme eligibility criteria.
Refinancing can be undertaken with or without an increase in the original borrowing.
What types of businesses are eligible?
Provided that they satisfy the other eligibility criteria, RLS is open to:
- sole traders;
- limited partnerships;
- limited liability partnerships;
- co-operatives and community benefit societies; and
- any other legal entity carrying out business activity in the UK with business activity operating through a business account.
The business must generate more than 50% of its turnover from trading activity in the UK (i.e. the sale of goods or services), unless they are a registered charity or further education establishment.
Is the scheme available for all sectors?
No. Banks, building societies, insurance companies; public-sector bodies; and state-funded primary and secondary schools are not eligible.
Is the scheme appropriate for start-ups?
Yes, at the discretion of the lender and subject to meeting the Scheme eligibility criteria.
For early-stage businesses in their first three years of trading, the British Business Bank’s Start Up Loans programme (loans from £500 to £25,000 at interest of 6% per annum) may be more suitable.
Visit startuploans.co.uk for more information.
Can companies that have received support from the Enterprise Investment Scheme (EIS) apply for RLS?
Yes. Companies that have received funding through EIS are eligible, provided that they satisfy the other Scheme eligibility criteria.
What is the definition of a borrower’s group?
RLS uses two definitions for a borrower’s group in order to determine the maximum facility size a business is eligible for. For small and medium businesses within scope of the Northern Ireland Protocol, a borrower’s extended group is also used for assessing whether they are a micro or small business for the purposes of the “undertaking in difficulty” test.
- Borrower group: This includes the borrower and all linked enterprises (broadly speaking any company that has control over your business or that you have control over). This includes businesses that are linked through individuals but excludes business that are linked through private equity or venture capital ownership.
- Borrower extended group: This includes the borrower and all partner and linked  enterprises, as defined by the European Commission.
Will applicants be required to pass the EU’s ‘undertaking in difficulty’ test?
Some applicants will be in scope of the Northern Ireland Protocol, and therefore remain subject to the EU State aid rules. Medium-sized and large businesses in scope of the Northern Ireland Protocol will need to pass the full EU ‘undertaking in difficulty’ test. Micro and small businesses in scope of the Northern Ireland Protocol will only be subject to a simplified EU ‘undertaking in difficulty’ test.
The Northern Ireland Protocol only applies to subsidies that affects trade in goods and electricity between Northern Ireland and the EU. Therefore, in general, businesses that provide services in Northern Ireland do not need to pass the EU “undertaking in difficulty” test to gain access to the scheme. There are certain limited circumstances in which a subsidy to a business that provides services could still distort competition or affect trade of a particular good between Northern Ireland and the EU and these businesses will need to pass the EU undertaking in difficulty test.
How do I know whether I am in scope of the Northern Ireland Protocol?
As part of the application, businesses will need to complete three simple questions which will assess whether or not a borrower is potentially in scope of the Northern Ireland protocol:
- Does the business participate in wholesale electricity markets in Northern Ireland?
- Is the business based in Northern Ireland?
- Does the business have operations in Northern Ireland?
If a business appears to be in scope of the Northern Ireland protocol, the EU ‘undertaking in difficulty’ test will be applied. If the business does not pass the EU ‘undertaking in difficulty’ test, for reasons other than it being subject to collective insolvency proceedings, it may have the opportunity to complete a more detailed questionnaire to determine whether or not it is in scope.
What test applies to businesses not in scope of the Northern Ireland protocol?
Where businesses are not in scope of the Northern Ireland protocol , they must not be in collective insolvency proceedings.
Businesses who have entered into a Company Voluntary Arrangement since 16 March 2020 may still be eligible for the Scheme subject to a lender’s viability assessment.
What is the EU ‘undertaking in difficulty’ test?
Under the EU test, ‘undertakings in difficulty’ include:
- Individuals or companies that have entered into collective insolvency proceedings;
- Limited companies that have accumulated losses greater than half of their share capital in their last annual accounts (this does not apply to SMEs less than 3 years old);
- Partnerships, limited partnerships or unlimited liability companies that have accumulated losses greater than half of their capital in their latest annual accounts (this does not apply to SMEs less than 3 years old);
- Undertakings that have received rescue aid and have not yet reimbursed the loan or terminated the guarantee, or have received restructuring aid and are still subject to a restructuring plan;
- Companies that are not SMEs where, for each of the last two accounting years: i) the book debt to equity ratio has been greater than 7.5; and ii) the EBITDA interest coverage ratio has been below 1.0.
The test is applied as at 31 December 2019, so as to permit support to businesses that are only in difficulty as a result of Covid-19. A business that was in difficulty on 31 December 2019 but at the date of application is no longer in difficulty will in principle be eligible for the scheme.
The full EU ‘undertaking in difficulty’ test does not apply to micro or small businesses. Micro and small businesses are businesses that have fewer than 50 employees and less than £9,000,000 in annual turnover and/or annual balance sheet total. Micro and small businesses must not be (a) subject to collective insolvency procedure under national law, or (b) in receipt of rescue aid (which has not been repaid) or restructuring aid (and are still subject to a restructuring plan) at the time they apply for a scheme facility.
How many lenders are accredited for RLS, and how can I find them?
A full list of accredited RLS lenders is available on the RLS Accredited lenders page.
The British Business Bank invited all lenders previously accredited under CBILS to apply to become accredited under the new Scheme. RLS is now closed to new applications from prospective lenders.
I am not an existing customer of any of the participating lenders. Can I still apply?
RLS is open to all eligible borrowers – your business does not need to be an existing customer of the lender you are approaching.
What supporting documents might I need to apply?
You may need to provide certain documents when you apply for a RLS backed facility. These requirements vary from lender to lender, but are likely to include:
- Management accounts
- Business plan
- Historic accounts
- Details of business assets
If you do not have everything listed here, a RLS facility could still be an option to provide finance to support your business.
What checks will I be subject to?
Applicants will subject to a lenders standard credit and fraud checks.
Do I need to provide evidence that I have a viable business?
Yes. A lender must consider your business to be viable, and in making their assessment of your borrowing proposal, they have the option of disregarding any concerns over short-medium term business performance due to the uncertainty and impact of Covid-19. However, lenders are not required to overlook these concerns and all final lending decisions are fully devolved to the lender.
You must also self-certify that your business has been impacted by Covid-19.
When do I start repayments?
This will depend on a lender’s own policies and may vary between lenders. For example, some lenders may offer a Capital Repayment Holiday (CRH) for a period of time at the outset of the facility, but this is not a standard feature of RLS. The same applies for interest payments and other lender-levied fees, which will be the responsibility of the borrower.
Interest payments and capital repayments will commonly start a month after taking out a facility and be monthly thereafter.
Unlike BBLS and CBILS, the government does not provide a 12-month ‘Business Interruption Payment’ for RLS.
Will details about my loan be made publicly available?
Where required, information about facilities provided to UK businesses may be publicised on a new UK Government transparency database. Details of the UK reporting requirements are currently subject to consultation, and further information will be available in due course.
In addition, for businesses in scope of Article 10 of the Northern Ireland Protocol, information will be reported to the European Commission, who may publish such details on the European Commission’s State aid transparency website.
Information that may be published is a subset of the information a business provides in their loan application, including:
- the identity of the borrower, for example, the name of your business, or potentially your name if you are a sole trader or partnership;
- type / size of business;
- region where the business is located;
- sector in which the business operates;
- date the aid was granted; and
- the amount of aid granted.
The information reported is related to the business but may include personal data if you are a sole trader or a partnership or your business name includes reference to a natural person.
Comparison to CBILS, CLBILS and BBLS
What is the difference between this new scheme and CBILS/CLBILS/BBLS?
RLS aims to help businesses affected by Covid-19 who can afford to take on additional debt finance to access the finance they need, including for managing cashflow, investment and growth. As the economy is expected to gradually recover through 2022, RLS aims to be more targeted than the emergency Covid-19 schemes. Key differences include:
Businesses being able to borrow up to £2m, with the scheme open to all businesses with a turnover not exceeding £45m. Minimum facility sizes will vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts,
The requirement for businesses to pay interest and fees from the outset;
All eligible businesses will be subject to standard customer credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks. In making their assessment, lenders may, but are not required to, disregard any concerns over a business’s short-to-medium term business performance due to the uncertainty and impact of Covid-19;
The requirement for lenders, in the absence of the scheme, to be unwilling to offer a facility on similar terms either at all, or at the same or a lower price; and
Businesses who have taken out a CBILS, CLBILS or BBLS loan will be able to access the new scheme, although the total amount a business can borrow will depend on their lender’s assessment and scheme requirements.
What changes have come into effect from 1 January 2022?
The following changes came into force for all offers made under the scheme:
- The scheme will only be open to businesses with a turnover not exceeding £45m per annum, whereas previously there was not a turnover restriction.
- The maximum amount of finance available has been reduced from £10 million per business to £2 million per business (maximum amount per Group reduced from £30m to £6m).
- The guarantee coverage that the government will provide to lenders will be reduced from 80% to 70%.
Can businesses still access CBILS/CLBILS/BBLS?
No. CBILS, CLBILS and BBLS, including BBLS Top-Ups, closed for applications on 31 March 2021. New applications are no longer being accepted under these schemes.
Existing BBLS borrowers are still able to access Pay As You Grow options to help with their repayments. Further detail on Pay As You Grow is available on the British Business Bank’s website or from your BBLS lender.
A term extension beyond six years, up to a maximum of 10 years for existing RLS facilities can be made in connection with the provision of forbearance relating to the facility, at the discretion of the lender if within the lender’s usual forbearance policies.
This could include 2020 accounts if available.
A term extension beyond six years, up to a maximum of 10 years for existing RLS facilities can be made in connection with the provision of forbearance relating to the facility, at the discretion of the lender if within its usual forbearance policies.
A ‘partner’ enterprise describes the situation when an enterprise establishes certain financial partnerships with other enterprises, without one enterprise exercising effective direct or indirect control over the other. Partners are enterprises that are neither sole enterprises nor linked to one another.
This is the case where an enterprise has a holding equal to or greater than 25% of the capital or voting rights in another enterprise and/or another enterprise has a holding equal to or greater than 25% in the enterprise in question.
Linked businesses form a group by controlling the majority of voting rights of an enterprise, either directly or indirectly; or being able to exercise dominant influence over an enterprise.
Enterprises are linked when one holds a majority of the shareholders’ or members’ voting rights in another; or can appoint or remove a majority of the other’s administrative, management or supervisory body; or there is a contract between them enabling one to exercise a dominant influence over the other; or one can exercise sole control over a majority of shareholders’ or members’ voting rights in another. A typical example is a wholly owned subsidiary.
An enterprise is indirectly linked to a business if it is directly linked to an enterprise that is linked directly to the business.
For businesses in scope of the Northern Ireland Protocol, the State aid basis for the scheme is State aid decision SA.56841, as amended by SA.57078, SA.58078 and SA.58823.
SMEs are defined as a business with less than 250 employees and either (a) a turnover of less than £45.00m, or (b) a balance sheet of less than £38.75m.
Not being a bank/ building society; an insurer or reinsurer (can be an insurance broker); a public-sector body; a state funded primary or secondary school; or an individual other than a sole trader or a partner acting on behalf of a partnership.If a lender can offer finance on normal commercial terms without the need to make use of the scheme, they may do so.