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The Recovery Loan Scheme has been extended – are you eligible?

The Recovery Loan Scheme has been extended – are you eligible?
Tuesday, December 07, 2021

With most of the Government’s Covid financial support schemes now closed, the Recovery Loan Scheme (RLS) has been a last route to funding for many Covid-impacted businesses.

The RLS was scheduled to end on 31 December, putting a very final full stop on government-backed financial assistance for the business community. But in the Autumn Budget & Spending Review 2021, the Chancellor, Rishi Sunak, announced an extension of six months to the scheme, making it possible to apply for a recovery loan until 30 June 2022.

So, is your business eligible for this funding? And, how much could you borrow to fund the next stage of your recovery in 2022?

Who is eligible for the Recovery Loan Scheme?

The Recovery Loan Scheme (RLS) is aimed primarily at businesses which are viable in the market, but that are struggling to recover and grow due to Covid-19. Funding of up to £10million is available to eligible businesses that can meet the conditions for making an RLS claim. 

Your business must:

  • Have been negatively impacted by the Covid-19 pandemic
  • Be trading in the UK (more than 50% of turnover)
  • Be a viable business proposition, going forward.

A chance to boost your working capital

If you meet the RLS criteria, this is an excellent opportunity to borrow money on very attractive terms and to bring additional working capital back into the business. Facilities are available as asset finance, invoice finance, overdrafts or term loans.

  • Within the £10 million, the maximum for an individual business is:
    • Double 2019 (or latest year available) wage bill
    • 25% of 2019 turnover
    • 12 months (18 months for SME’s) forecast liquidity requirements
  • The lender can choose which of the three sub-maximums to apply. Existing CBILS (but not BBL) advances come off the sub-maximum.
  • The minimum loan and maximum term depends on the type of facility taken out:
    • Asset Finance £1,000 / max 6 years
    • Invoice Finance £1,000 / max 3 years
    • Overdraft £25,001 / max 3 years
    • Term Loan £25,001 / max 6 years
  • The RLS is offered by a range of different approved lenders and each lender will determine the specific interest rates and applicable fees (taking into account the benefit of the government guarantee). 
  • The Government currently guarantees 80% of the loan. Personal guarantees (PGs) are not allowed for facilities below £250K. Above £250K, PGs can be required but can’t include your private residence and are capped at 20% of any shortfall after any business assets sold in event of default.

A decrease in the government-backed loan guarantee

Currently, the Government is offering a guarantee against 80% of any losses on recovery loans that are taken out via accredited lenders. This has encouraged lenders to offer loans where the decision was marginal without the guarantee, while keeping them open to a small amount of risk.

Unfortunately, an additional change to the scheme was also announced in the Autumn Budget, with the level of that government-backed guarantee dropping down from 80% to 70%. This 10% drop down to a 70% guarantee will take place for loans advanced from 1 January 2022.

The decrease in the guarantee could be problematic. It’s not yet known if currently accredited lenders will need to re-apply for re-accreditation, and this process could have an impact on prices and the availability of RLS lenders.

At present, it’s uncertain what the full impact of the decrease will mean for recovery loans. But, with an abundance of caution, we would strongly advise applying for a recovery loan before 31 December 2021, to alleviate any issues. 

Talk to us about applying for a recovery loan

Lenders will want to see some form of business plan or projection before approving any facilities. We’re ideally placed to help you prepare financial projections and to provide the accounts, cashflow forecasts and background information that a lender will want to see.

Come and talk to us about the Recovery Loan Scheme and your financing requirements in general. We’ll support your applications and will help you to manage your funding needs.

Get in touch to discuss the Recovery Loan Scheme.

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We found Panthera via our search for a Xero expert. We knew the software we wanted to use, and needed a forward-thinking accountancy partner who could get us up and running, and teach us the ropes moving forward. Tory and her team have always been on hand to answer our questions, and help us to grow as a business, particularly during periods of big change, such as becoming VAT registered. They are always on hand to alleviate any concerns and help to keep our records in order, which makes our year-end accounts an absolute breeze! Being based in Bristol, our relationship is entirely email based, alongside one consolidation meeting at year end - this keeps things simple, efficient and most importantly, hassle-free.

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The whole team at Panthera are great! Working with them has been a huge support to my growing business. They help me to understand the numbers I need to know. They give me technology solutions like Xero so that I can process things quickly and have access to my own figures. They are quick to reply, highly knowledgeable, nothing is too much trouble and as well as making sure that everything is compliant and on time, they are enthusiastic, professional and fun to work with.

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I had been with Mr Dunn for 20 years when upon his death Panthera took over the business. They now play a bigger part in the running of my business, they do all the stuff that has to be done but I don't like doing ie book keeping, VAT, wages, and returns. They are always there to answer queries and sort out issues and make sure all Tax deadlines are met. Their costs are fair, service is great and I have and would highly recommend them.

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Panthera are fantastic. Always professional, going the extra mile for their clients and delivering superb service. I recommend them all the time to my clients.

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