News
Extension to the Recovery Loan Scheme
24 - 08 - 2022
A new version of the Government's expiring Recovery Loan Scheme (RLS) has been announced as part of plan for economic recovery post COVID-19. Phase 1 of the Recovery Loan Scheme ceased on 30 June 2022.
The new business loan scheme,
which is regarded as an extension of the original recovery loan scheme or Phase
2, was instigated as of 01 August 2022 and is expected to run for 2 years until
30 June 2024.
Banks offering the Loan facility
The scheme will be administered
by The British Bank on behalf of the Secretary of State for BEIS.
Currently the following banks and
lenders have announced they are participating in the scheme:
·
Atom
Bank;
·
Bank of
Scotland,
·
BCRS
Business Loans;
·
Coventry
& Warwickshire Reinvestment Trust (CWRT);
·
DSL
Business Finance Ltd;
·
First
Enterprise Loans;
·
Genesis;
·
HSBC;
·
Lloyds
Bank;
·
NatWest;
·
Royal
Bank of Scotland;
·
Ulster
Bank.
Others are expected to announce
their involvement.
Reason for the Scheme
The scheme is intended to help
businesses recover and grow following the Covid-19 pandemic.
The intention is to offer funding
to businesses who may be struggling to access finance from elsewhere.
Availability
The loans should be available to
all businesses regardless of whether they have already used the RLS, CBILS,
Bounce Back Loan or any other coronavirus finance scheme.
Business must be trading in the
UK with a maximum turnover of £45 million per year.
Business cannot currently be
involved in insolvency proceedings. Businesses must be able to show that they
are viable and not in difficulty.
Lenders
will be required to certify that they would not have been able to offer a
facility to the business on their normal commercial terms, or that they would
have only been able to do so at a higher interest rate.
Features
·
Government
will underwrite 70% of the loan value;
·
Business
can borrow from £25,001 up to £2 million for term loans and overdrafts and
£1,000 minimum for asset and invoice finance;
·
A
Principal Private Residence cannot be used as security so no one should be
putting their home at risk;
·
Loan
can be repaid between 3 months and a
maximum of 6 years;
·
Borrowers
will need to confirm in writing that any loan will not mean they have exceeded
the maximum subsidy the business is allowed to receive.
Eligibility
·
Loan
must be for a legitimate business purpose;
·
Turnover
up to £45 million;
·
Trading
activity must be UK based;
·
No
Covid-19 impact assessment is required;
·
Lender
must consider if the borrower has a viable business proposition but may
disregard concerns over business performance due to Covid-19;
·
Business
cannot be in difficulty;
Interest Rates
As the Government is underwriting
70% of the loan the lender has a lower risk of losing their funds. The interest
rates should, therefore, be competitive and lower than other forms of finance.
The actual interest rate will need to be agreed with the lender. The annual effective rate of interest and fees
cannot exceed 14.99%.
Early Repayment
Early repayment terms will depend
on the terms of the loan and may include an early repayment settlement fee.
How does the Recovery Loan
compare to other forms of finance?
Borrowers should consider their
requirements and investigate the other forms of finance available to them.
Dependent on business needs and the reasons for finance there may be other
sources of finance that are more suitable.
Further Information
Further information can be found
on the British Bank website at:
https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme
If you would like to discuss any
of the information noted above please contact us on:
01244 625 500 or 01978 364
000
contactus@foremansllp.com
Whilst all due care and attention has been taken in
the preparation of these notes no liability
can be accepted for any omission or item contained therein.

