Recovery Loan Scheme reintroduced and extended for 2 years due to economic crisis.
As businesses continue to struggle in the current climate, the government has announced that the Recovery Loan Scheme (RLS) is back for a third time from 1 August and will run until June 2024.
The decision was made after government figures showed that the scheme gave small businesses access to more than £4.5bn of lending through over 20,600 facilities during its lifetime.
What is the Recovery Loan Scheme?
The original RLS was introduced to replace the Coronavirus Business Interruption Loan Scheme (CBILS) in April 2021.
Initially, it was only due to run until 31 December 2021, but another wave of COVID forced the government into extending it for a further six months, giving it a new end date of June 2022.
However, as the government’s emergency COVID measures have started to close for businesses, an amalgamation of economic factors including the Russo-Ukrainian War and the semiconductor shortage, have forced the government to reintroduce the scheme.
What are the criteria for the scheme?
All businesses, apart from those that are self-employed, can apply for funding under the scheme.
You can use the finance for any legitimate business purpose – including managing cashflow, investment and growth, though you will need to able to afford to take out additional debt for these purposes.
The maximum amount of external finance available will be £2m per business in Great Britain and £1m for businesses in Northern Ireland.
Under the previous RLS, personal guarantees were not needed for up to £250,000, and this is still the case.
However, in order to bring the scheme in line with standard commercial practice, personal guarantees are now no longer a requirement for over £250,000 either, though they are still permitted, so some funders may still require them.
The government will still provide a guarantee of 70% for loans and the borrower will remain 100% liable for the debt.
Will I need to show how COVID-19 has affected my business?
In short, no.
Under the previous iteration of the RLS, businesses would be required to show how the pandemic has affected their business to qualify for the finance.
This is no longer the case.
Instead, funders will need to certify that they wouldn’t have been able to offer funding to the business under normal commercial terms, or that they would have only been able to do so at a higher interest rate.
When can I apply?
Applications for the new scheme will open on 1 August and will close on 30 June 2024 – a move that has been lobbied for by several organisations in order to help businesses through the turbulent economy.