The Recovery Loan Scheme - the facts

Blogs 10 Jun 2024

Finance experts from FSB Funding Platform answer your frequently asked questions about how the Recovery Loan Scheme works, what’s involved, and how they’ve made the application process easier for FSB members.

A version of this article was first published in June 2021. 

Applications for the Recovery Loan Scheme (RLS) remain open as part of the Government’s plan to support UK businesses as they recover and grow following the coronavirus pandemic. The scheme aims to give small businesses affected by COVID-19 financial support of between £1,000 and £2 million for any legitimate business purpose, such as cash flow, investment, and growth.  

The scheme provides accredited lenders with a 70% guarantee from the government. This means that if in the worst case scenario the loan defaults, the lender can claim 70% of their loss under the guarantee.

The British Business Bank has stated that a key aim of the Recovery Loan Scheme is to improve the terms on offer to you. 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.

How do I access the Recovery Loan Scheme? 

FSB Funding Platform is providing FSB members with an easy way to access multiple providers for the Recovery Loan Scheme (RLS) by completing an application online.  

As an FSB member, you can register through FSB Funding Platform and make one simple application, saving you time and effort. FSB Funding Platform then do the hard work for you by checking your eligibility with our current list of providers. Not all providers are available through the Funding Platform now, but more are being added.  

FSB Funding Platform’s finance advisers are also on hand to answer any questions you may have about the scheme and can offer you help within 48 hours, based on a combination of intelligent technology and excellent customer service. The team can also use your application to suggest other funding options available to you. 

When is the deadline? 

You have until 30 June 2024 to apply for the Recovery Loan Scheme, subject to review.  

Is my business eligible? 

The eligibility criteria will vary for each lender, and as such, each lender has the authority to decide whether to offer finance to your business or not.  However you must meet these requirements to be eligible to apply for the Recovery Loan Scheme: 

  • Be UK-based in your business activity
  • Have an annual turnover of no more than £45m
  • At least 50% of your revenue must be from ‘trading activities’ this excludes rental income
  • Your business cannot be a bank, building society, public sector body or state funded primary or secondary school as these are not eligible 

I applied for a Bounce Back Loan Scheme (BBLS) or Coronavirus Business Interruption Loan Scheme (CBILS). Can I still apply for the Recovery Loan Scheme? 

Yes, the Recovery Loan Scheme is still an option for your business but note that the circumstances limit the amount you may borrow under RLS.  

How much can I borrow and what does it cover? 

The Recovery Loan Scheme covers Term Loans, Asset Finance, Invoice Finance and Revolving Credit (Overdrafts) from £1,000 up to £2 million. Finance terms are up to six years for Term Loans and Asset Finance facilities. Lenders have agreed they will not take personal guarantees as security for lending below £250,000. 

Lenders will require a personal guarantee under the current iteration of the Recovery Loan Scheme. This effectively acts as a promise that if for whatever reason the business cannot repay the loan, you as the business owner will be responsible for repaying it.

How much you can borrow will be up to the discretion of the specific lender or lenders you apply, but they will take into consideration factors such as your business’ turnover.

If you have been offered finance and are unsure about the terms, you can request a call back from the team at FSB Funding Platform, who are always happy to try and help you review your options as an FSB member. 

How much interest will I have to pay? 

Interest and fees to be paid by the business from the outset: 

  • Fees associated with the RLS facility
  • The annual effective rate of interest, upfront fee, and other fees cannot be more than 14.99% 

What information will lenders need from me? 

You should expect to provide information to lenders about your funding requirements, as well as supporting documentation. This may include: 

Funding requirements 

  • The amount you are seeking 
  • What the funding will be used for — the lender is obliged to check that their finance product suits your business needs 
  • Your preferred repayment period — this is important because lenders need to assess whether your business can afford the loan 

Supporting documents 

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

The above list will vary for each lender, but you will need to provide evidence to show that your business can afford to repay the amount you are borrowing plus interest. FSB members who use FSB Funding Platform can take advantage of Open Banking and accounting software integrations to help prepare their finance application in minutes. 

What happens after the Recovery Loan Scheme ends on 30 June 2024?

While the Recovery Loan Scheme is due to end on June 30, 2024, the government announced in the Spring Budget 2024 that it would be replaced by a new iteration named the "Growth Guarantee Scheme." The specific details are yet to be announced, but it has been confirmed that the terms will remain unchanged, and lenders participating in the scheme will continue to benefit from a 70% government-backed guarantee on loans up to £2 million.

The Growth Guarantee Scheme will launch in July 2024, however, any lenders who would like to offer the new Growth Guarantee Scheme will need to be accredited by the British Business Bank again. This accreditation process can take some time, which means there is likely to be a gap where government-backed business lending might not be available.

Make sure to apply before the deadline to make use of the Recovery Loan Scheme while it’s still here.

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