Recovery loan program opens today

The Recovery Loan Program (RLS) is open for applications starting today.

The regime, which was announced by Chancellor Rishi Sunak in his March 2021 budget, aims to support small businesses with additional financing to manage cash flow, growth and investments as they move towards a sustainable recovery.

The new program is expected to run until December 31, 2021, subject to review and replaces the Coronavirus Business Interruption Loan Program (CBILS), Bounce Loan Program (BBLS) and Loan Program for major business interruption against the coronavirus (CLBILS) which all ended on March 31. .

The maximum amount of a facility provided under the program is £ 10 million per company and £ 30 million per group. Minimum facility sizes vary, from £ 1,000 for asset and bill funding, to £ 25,001 for term loans and overdrafts.

Businesses can choose from term loans, overdrafts, asset finance, and invoices, as long as the lender is accredited for each of these types of finance.

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Term loans and asset finance facilities are available from three months to six years, with overdrafts and invoice finance available from three months to three years.

Firms that have taken out a CBILS, CLBILS or BBLS facility can access the new system, although the amount they borrowed under a previous system may in some circumstances limit the amount they can borrow under a previous system. of the RLS.

Interest and charges will be paid by the business upfront and the annual effective interest rate and upfront charges and the like cannot exceed 14.99%.

Personal guarantees are not permitted for installations of £ 250,000 or less. Above £ 250,000, the maximum amount that may be covered by RLS is capped at a maximum of 20 percent of the outstanding balance of the RLS facility once the proceeds from the company’s assets have been applied. No personal guarantee can be held on the main private residences.

The facilities supported by RLS are provided at the discretion of the lender.

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To apply for an RLS loan, the borrower must confirm to the lender that they have been affected by Covid-19 and are marketed in the UK. As a first step, businesses should go to their own finance provider, ideally through the lender’s website.

They may also consider contacting other lenders if they cannot access the financing they need. There is no restriction on turnover for companies that access the program.

The Lender will consider the Borrower to have a viable business proposition, but may disregard any concerns about their short to medium term business performance due to the uncertainty and impact of Covid-19.

Lenders are required to perform credit and fraud checks for all applicants, as well as routine checks such as know your customer and anti-money laundering. The checks and approach may vary among lenders.

The British Business Bank has previously invited lenders accredited under CBILS to apply for accreditation under the RLS. The bank said that once accredited under the program, lenders will be listed on its website and that it expects to add many more in the coming weeks.

The British Business Bank has said that one of the main objectives of the RLS is to improve the terms offered to borrowers, but if a lender can offer a borrower the choice of a business loan on better terms, without requiring collateral provided by the RLS, it should do so.

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About Jessica Zavala

Jessica Zavala

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