Life After CBILS: The Recovery Loan Scheme

The Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) both ended at the end of March. However, access to finance remains a major challenge for UK businesses, many of which will need months or even years to fully recover from the coronavirus pandemic.


In its efforts to support businesses through and beyond the pandemic, the government has replaced the CBILS and BBLS schemes with the Recovery Loan Scheme (RLS), launched on 6 April 2021.


As with CBILS and BBLS, the RLS will be operated through the British Business Bank (BBB), and lenders need to be formally accredited to be able to offer loans through the scheme. It’s taking time, though, and at the time of writing, there are only 23 accredited lenders, compared to more than 100 for CBILS. More lenders are expected to join the BBB’s accredited panel in due course.


What do we know so far about the Recovery Loan Scheme?

As with CBILS, individual lenders are given general guidelines by the BBB, but lenders have significant discretion as to how to implement them.


How much can be borrowed, and what forms of finance will be available?

Businesses looking to raise commercial finance can apply for loans of between £25,000 and £10 million under the Recovery Loan Scheme. For groups of “linked companies”, there is an overall borrowing limit of £30 million.


The scheme will also offer asset finance and invoice finance, in amounts starting from £1,000. Overdraft facilities are available.


What about guarantees?

As with CBILS, the government will guarantee 80% of loans under the Recovery Loan Scheme. However, this doesn’t mean that businesses are off the hook when it comes to repayments – borrowers are still liable for repaying 100% of the loan.


For loans above £250,000 lenders can, at their own discretion, require personal guarantees or PGs from the company’s directors. As with CBILS, however, it’s case by case – not all lenders require PGs.


What are interest rates under the Recovery Loan Scheme?

Interest rates are capped at 14.99%, but in practice are generally lower. Fixed and variable interest rate options are likely to be available, depending on the type of loan.


Will the government pay the interest?

No! And this is probably the most significant difference between the CBILS and RLS schemes.


Under CBILS the government paid the first year’s interest on behalf of the borrower (as well as any upfront fees), making it hugely attractive for businesses seeking help under the scheme.


Under the Recovery Loan Scheme, all payments of interest and loan principal are the borrower’s responsibility.


What loan terms are available?

For term loans and asset finance, Recovery Loans are available up to six years. This is the same as CBILS.


For asset, invoice and overdraft facilities, terms are available of up to three years.


Is my business eligible for the Recovery Loan Scheme?

As with CBILS, the main eligibility criteria are that the applicant company:

  • must be based in the UK

  • must trade primarily in the UK

  • must have been financially impacted by the Covid-19 pandemic

The business doesn’t need to have been forced to close during the pandemic, and loan applications can be made by companies from almost any business sector – the only exclusions are only banks, building societies, insurers, schools and public sector bodies.


Loans are also available to companies of any size – there's no restriction relating to turnover or anything else.


There are no restrictions on what the loan funds can be used for –they can be used to manage cash flow, or to fund growth or investment.


As with any commercial finance application, lenders need to be satisfied that the business will be able to repay the loan. The usual credit, fraud and affordability checks will be carried out on each application.


Lenders may take into account the fact that the borrower’s business performance is likely to be hindered by the current economic situation. But they must be satisfied that the company has a viable longer-term business proposition.


While the government may be guaranteeing 80% of the loan, don’t be fooled into thinking that Recovery Loans are easy to qualify for. In our discussions with lenders, it’s clear that they’re still applying fairly strict and “responsible” eligibility criteria to business borrowers.


Companies that have already secured Bounce Back or CBILS loans can still apply under the Recovery Loan Scheme, although they may find that they may be able to borrow less, in order to limit total borrowing.


How do companies apply?

As with most forms of commercial finance, any business wishing to obtain a Recovery Loan first needs to select a lender.


They then need to complete an application with that lender, providing all of the necessary information, such as their latest accounts and bank statements, and await a decision on their application. Depending on the lender, this process can take anything from a few hours to a few days.


A good commercial finance broker can help guide you through the process, and will select the most suitable lender(s) according to the size and type of loan that you’re looking for.


When will the scheme end?

The RLS is currently scheduled to end on 31 December 2021 but, as with previous Covid-related government initiatives, it’s possible that the scheme will be extended.


Which lenders are participating?

As with CBILS and BBLS, the British Business Bank is managing the Recovery Loan Scheme for the government, and lenders need to go through a rigorous application process before being accredited.


As mentioned, 23 lenders have been accredited to date, including the major high street banks. Not every participating lender will offer every form of available finance; for example, some may only offer term loans and overdrafts, while others will only offer asset or invoice finance.


The list of accredited lenders is continually updated, and you can check the current list by visiting this page on the British Business Bank website.


Key Features – Recovery Loan Scheme vs CBILS

The Final Word

The Recovery Loan Scheme attempts to provide financial assistance to businesses as the UK emerges from the coronavirus pandemic.


Many of the features of the scheme are similar to the previous CBILS scheme, though the loans are not so financially attractive to borrowers because the government will no longer pay the first year’s interest or upfront fees.


If you’re considering the Recovery Loan Scheme for your business, or if you’re not sure what your options are, get in touch with Clear Idea Finance for a free, no-obligation conversation.


We’ll take the time to understand your business and your finance needs, and we’ll provide free and impartial advice on the most suitable finance for your business.