By Helen Ryan
The British Business Bank’s (“BBB”) Coronavirus Business Interruption Loan Scheme (“CBILS”) was first introduced in April 2021. The new iteration of the Scheme, the Recovery Loan Scheme (“RLS”) launched in August 2022 and will run until 2024.
Following on from our previous article regarding the CBILS, our follow-up article provides updated guidance regarding the new iteration of the Scheme, and examines the amendments that have been made to the Scheme.
The RLS is a government-backed scheme aimed at supporting access to finance for businesses in the United Kingdom, operated by the BBB on behalf of the Secretary of State for Business, Energy & Industrial Strategy. The Scheme’s accredited lenders provide support by means of either a loan, overdraft, invoice finance facility or asset finance facility. The Scheme’s aim is to provide financial aid to businesses that have been affected by Covid-19. The loan can be used for any legitimate business purposes, such as managing cashflow, investment and growth. The eligibility criteria for availing of the Scheme remains the same: small and medium businesses with an annual turnover of up to £45 million. Previously, the CBILS required that the borrower must confirm that it has been negatively impacted by Covid-19.
As an update to the previous Scheme, the Covid impact criterion is absent in the new iteration of the Scheme. In the eligibility section of the BBB’s website, it states that there is “No Covid-19 impact test required: Unlike the previous iteration of the scheme, for most borrowers, there is no requirement to confirm they have been affected by Covid-19”. It is unknown whether the absence of the requirement is in direct response to market feedback on the CBILS, however, the lack of the impact requirement is likely due to the ongoing effect that the pandemic has had on the economy, as observed through the ongoing supply chain issues and the cost of living crisis.
Previously, the Scheme supported loans of up £10 million for individual businesses and £30 million across a group, and also provided accredited lenders with a government-backed guarantee of 80 per cent on losses that may arise on facilities of up to £10 million. By contrast, the new iteration will support lending of up to £2 million for borrowers outside the scope of the Northern Ireland Protocol. Borrowers within the scope of the Northern Ireland Protocol may apply for lending of up to approximately £1 million, (subject to aid limit restrictions), and will provide the lender with a 70 per cent government-backed guarantee.
The BBB states that businesses that took out a previous CBILS facility before 30 June 2022 are not prevented from accessing the new iteration of the Scheme. However, there is a possibility that businesses may not be eligible to receive the maximum amount.
The BBB also states that the 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.
Lenders in the Scheme and the Application Process
When considering a prospective lender, the BBB’s website offers two filter options: ‘Filter by Financial Variant’ and ‘Filter by Region’. The current list of accredited lenders is detailed below:
The new iteration’s list of accredited lenders is short in comparison to the previous list affiliated with the RLS (but does include RBS, HSBC, Lloyds Bank and Natwest among others) and availability varies by region. However, it is likely that the list of accredited lenders will expand over time.
Under RLS, lenders are required to undertake their standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks for all applicants. Once an application has been submitted to an accredited lender, the lender will determine whether they can offer a commercial facility on better terms than the RLS facility. If they are able to offer better terms, they will do so. Otherwise, the lender, at their discretion, may elect to use the RLS to support an application. If one’s application with a lender is rejected, a borrower is not prohibited from applying to other RLS-accredited lenders.
For More Information
If you have any questions about this blog, please contact Drew D. Salvest, Natalie A. Stewart, Rebecca Green, Helen Ryan, any of the attorneys in our Banking and Finance Industry Group or the attorney in the firm with whom you are in regular contact.