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How Does the Recovery Loan Scheme Work?

Business Finance

How Does the Recovery Loan Scheme Work?

Updated: 17 November 2021

Following the announcement in the Autumn 2021 budget, the scheme has been extended and is now due to end on 30th June 2022. In addition, there are some further changes that will come into effect from 1st January 2022:

  • The scheme will only be open to small and medium sized businesses with a turnover of less than £45 million
  • The maximum loan amount available on the scheme will be £2 million
  • The Government guarantee to lenders is being reduced to 70%

All of the above changes will apply to all offers made from 1st January 2022.

As of 6 April 2021, UK businesses impacted by COVID-19 can apply for affordable finance via the Government’s Recovery Loan Scheme (RLS). 

The scheme follows on from the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), and the Bounce Back Loan Scheme (BBLS), which all closed for applications at the end of March 2021. These three schemes helped more than 1.6 million UK businesses gain access to over £75 billion in essential funding, since the pandemic began.

If your business has been negatively impacted by the COVID-19 pandemic, you may be eligible to apply for a business loan via the Recovery Loan Scheme. 

Not sure if recovery loan finance is right for your business? Let us talk you through it…

What is the Recovery Loan Scheme?

The Recovery Loan Scheme provides businesses with the financial support necessary to survive and grow in the wake of the COVID-19 pandemic. 

RLS finance can be used for “any legitimate business purposes”. This includes maintaining cashflow, investing in marketing, purchasing equipment, and paying staff wages.

Unlike previous coronavirus loan schemes, borrowers are required to pay all interest and fees under the RLS. The Government will not cover interest or fees for the first 12 months, or any portion of the RLS loan term.

How does the Recovery Loan Scheme work?

The Recovery Loan Scheme gives lenders an 80% government-backed guarantee on any outstanding balance if borrowers default. In essence, this significantly lowers the risk to the lender and broadens the number of business loan applications they can accept.

The British Business Bank (BBB) will oversee the RLS, with finance being made available via their network of accredited and approved lenders. There are currently more than 40 BBB-accredited lenders offering RLS finance around the UK, including Funding Circle, with many more still seeking approval.

Lenders need to offer their own non-Government backed loans alongside RLS. If they are able to offer finance on similar or better terms without using the scheme, then they will do so.  

How much can I borrow with the Recovery Loan Scheme?

Under the business Recovery Loan Scheme (RLS), lenders can offer up to £10 million in finance for terms of up to six years, in the form of:

  • Loans
  • Overdrafts
  • Asset financing
  • Invoice financing

Individual businesses can borrow up to £10m, or as little as:

  • £1,000 (asset or invoice finance)
  • £25,001 (loans or overdrafts)

These figures refer only to the limits of the recovery scheme itself. Accredited lenders are free to set their own minimum and maximum finance thresholds, within these limits.

Is a business recovery loan right for me?

You may be eligible for RLS finance if you meet the following:

  1. Your business has been negatively impacted by COVID-19 (and you are willing to self-certify to the fact)
  2. Your business is UK-based and conducts at least 50% of its trading activity in the UK
  3. You are a sole trader, corporation, limited partnership, limited liability partnership or any other legal entity that carries out business activities in the UK (and all other points apply)
  4. You have been trading for two or more years
  5. You are NOT in collective insolvency proceedings

Note that the following sectors are not eligible for the Recovery Loan Scheme:

  • Banks
  • Building societies
  • Public sector bodies
  • Insurance companies 
  • State-funded schools

Can I apply for the Recovery Loan Scheme (RLS) if I already have a CBILS or Bounce Back loan?

You can apply to the scheme if you have previously received finance via government-backed coronavirus loan schemes. If you have a Coronavirus Business Interruption Loan Scheme (CBILS) loan this may affect how much you can borrow. However, Bounce Back loans do not count toward the government’s lending cap.  

Recovery Loans Scheme interest rates, fees & security

The Government’s rules state that annual interest and fees on Recovery Loan Scheme finance may not exceed 14.99%. Within these boundaries, individual lenders are free to use their own discretion when setting interest rates and fees. The total cost of your loan will depend on your financial circumstances, the amount you borrow, and the repayment term.

How to apply for the Recovery Loan Scheme 

Funding Circle are proud to work alongside the British Business Bank by providing finance of up to £350,000 to small businesses under the Recovery Loan Scheme (RLS). 

We’re currently accepting applications from limited companies and LLPs. Check your eligibility here with our 30-second online form. 

  1. Find out if you qualify using our online form (this does not affect your credit score)
  2. Fill out our easy online application
  3. Get your decision and personalised quote
  4. Once you accept your offer,  your loan will be deposited straight into your business account

If we’re able to offer you a loan on similar or better terms without RLS, we will do so. 

Why choose a Recovery loan from Funding Circle?

As we are an accredited lender,  you can now benefit from our fast, straightforward application process under the Recovery Loan Scheme. We’ve helped 100,000 businesses borrow over £11 billion to take their business forward, and 4 out of 5 customers would come back to us first next time they needed funding.

Apply for the Recovery Loan Scheme (RLS) with Funding Circle to get competitive interest rates and no fees for full early repayment. 

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