Great News For SMEs As Recovery Loan Scheme Is Extended.
The Recovery Loan Scheme (RLS) has been extended for a further two years in an effort to support, which is excellent news for UK businesses. The Recovery Loan Scheme is designed to help UK businesses, The RLS takes the place of the previous CBILS initiative, which saw many companies taking advantage of Government-backed loans. The Recovery Loan Scheme aims to improve the terms on offer to borrowers.
The Recovery Loan Scheme was initially available until 31 December 2021 and was extended on amended terms until 30 June 2022. It has since been further extended for a further two-year period, until 30 June 2024. The Recovery Loan Scheme Phase 3 can be used to enable a business to access funding where it is unable to do so on a commercial basis or can only do so at a higher price. In this way, the Scheme supports the UK Government in increasing the supply of finance to viable businesses, therefore supporting the UK economy.
Eligibility criteria include:
Turnover limit: The scheme is open to smaller businesses with a turnover of up to £45 million (on a group basis, where part of a group).
UK-based: The borrower must be carrying out trading activity in the UK and, for most businesses, generating more than 50% of its income from trading activity.
No Covid-19 impact test required: Unlike the previous iteration of the scheme, for most borrowers¹ there is no requirement to confirm they have been affected by Covid-19
Viability test: The lender will consider that the borrower has a viable business proposition but may disregard any concerns over its short-to-medium-term business performance due to the uncertainty and impact of Covid-19.
Business in difficulty: The borrower must not be a business in difficulty, including not being in collective insolvency proceedings.
Subsidy limits: Borrowers will need to provide written confirmation that receipt of the RLS facility will not mean that the business exceeds the maximum amount of subsidy they are allowed to receive. All borrowers in receipt of a subsidy from a publicly funded programme should be provided with a written statement, confirming the level and type of aid received.
Scheme features include:
Up to £2m facility per business group: The maximum amount of a facility provided under the scheme is £2m per business group for borrowers outside the scope of the Northern Ireland Protocol, and up to £1m per business group for Northern Ireland Protocol borrowers. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts. A borrower in scope of the Northern Ireland Protocol may borrow up to £1m per business group, unless such borrower operates in a sector where aid limits are reduced, in which case the maximum that can be borrowed is subject to a lower cap.
Term length: Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years.
Personal Guarantees: Personal guarantees can be taken at the lender’s discretion, in line with their normal commercial lending practices. Principal Private Residences cannot be taken as security within the Scheme.
Guarantee is to the lender: The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it has completed its normal recovery process. The borrower always remains 100% liable for the debt.
Subsidy: The assistance provided through RLS, like many Government-backed business support activities, is regarded as a subsidy and is deemed to benefit the borrower. There is a limit to the amount of subsidy that may be received by a borrower, and its wider group, over any rolling three-year period. Any previous subsidy may reduce the amount a business can borrow.
All borrowers in receipt of a subsidy from a publicly-funded programme should be provided with a written statement, confirming the level and type of aid received. Borrowers will need to provide written confirmation that receipt of the RLS facility will not mean that the business exceeds the maximum amount of subsidy they are allowed to receive.
GSM Finance has over twenty-five years of experience as London's largest independent asset finance brokerage and GSM has RLS lenders available to help assist clients. Whether you want to secure your business's present or safeguard its future, get in touch today to find out more about how our RLS service can help.
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