Recovery Loan Scheme

The government’s Recovery Loan Scheme (RLS) aims to support UK businesses as they recover from the Covid-19 pandemic, with lending of up to £2m

Arabella McAvoy

Updated: January 18, 2022 at 11:28 am

The UK government launched the Recovery Loan Scheme (RLS) in April 2021 with the aim of supporting access to finance for UK businesses as they recover from the Covid-19 pandemic.

The RLS was originally intended to run until the end of 2021, subject to a review. In the Autumn Budget 2021 the government announced it would be extending the scheme until June 2022. The revamped RLS scheme took effect on 1 January 2022, with a lower maximum amount available to businesses (£2m) and a lower government guarantee (70%). You’ll find the changes summarised below.

There are now more than 70 accredited lenders, offering lending for up to six years. Swoop can also now offer a 12-month, interest-only loan of up to £250,000 through our platform.

Whether you’re looking to refinance loans you took out during the pandemic or you need extra cash to realise your growth plans, it’s easy to find out what you might qualify for by registering with Swoop.

NOTE TO ADVISORS: As the payment holidays for CBILS loans are ending, refinancing to products such as the 12-month interest-only loan may be an attractive way for your client to buy time.

What is the Recovery Loan Scheme (RLS)?

When does the Recovery Loan Scheme start and end?

Is my business eligible?

Can I apply for the Recovery Loan Scheme if I’ve had a Bounce Back Loan or borrowed under CBILS or CLBILS?

How much can I borrow?

What are the interest rates?

When do I need to pay the money back?

How does the Recovery Loan Scheme differ from the schemes it replaces?

What is the government guarantee?

What can the funds be used for?

Can I refinance my BBLS or CBILS loan, in part or in full?

Can I get a Recovery Loan with bad credit?

Can a sole trader access the Recovery Loan Scheme?

Which lenders are taking part in the new Recovery Loan Scheme?

When was the scheme announced?

What other government-backed finance schemes are available to businesses post-Covid?

Tips for applying for the Recovery Loan Scheme

Mistakes to avoid when applying

What do I do if I’ve been rejected for the Recovery Loan Scheme?

Will I need a credit check to apply for the Recovery Loan Scheme?

How do I apply?

What is the Recovery Loan Scheme (RLS)?

The Recovery Loan Scheme (RLS) is a government scheme aimed at supporting access to finance for UK businesses amidst the Covid-19 pandemic.

It replaced the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large
Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS), all of which closed to new applicants on 31 March 2021.

RLS is designed can be used for business purposes, for example, managing cashflow, investment and growth. If your business has taken out a CBILS, CLBILS or BBLS facility you are still able to access the latest scheme.

Bear in mind that the Recovery Loan Scheme exists to improve the loan terms available to your
business. These terms reflect the protection that the 70% government guarantee offers to enders. If, however, Swoop can point you towards commercial loans with better terms – or towards other types of lending – we can do so once you register with us.

When does the Recovery Loan Scheme start and end?

The Recovery Loan Scheme (RLS) launched on 6 April 2021 and was set to close at the end of 2021. In the Autumn Budget 2021, the Treasury announced it was extending the scheme for six months (until June 31 2022), albeit but with a reduced maximum amount available to businesses and lower government guarantee (see below).

Is my business eligible?

UK businesses of any size can apply for a loan or overdraft. This is the main difference between the Recovery Loan Scheme (RLS) and the coronavirus finance support schemes it replaces (BBLS, CBILS, CLBILS). With the RLS there are no restrictions on turnover – at least until 1 January 2022, when the scheme will be open only to small and medium-sized enterprises (SMEs), as announced in the Autumn Budget, 2021.

Your business must however meet certain criteria in order to access the scheme. Specifically, your business must:

  • be a UK trading company
  • be viable (or would be viable were it not for the pandemic)
  • have been impacted by the coronavirus pandemic
  • not be in collective insolvency proceedings.

If a lender can offer finance on normal commercial terms without the need to make use of the scheme, they may do so.

Three more things to note:

  • Lenders are required to undertake credit and fraud checks for all applicants to the Recovery Loan Scheme – the checks and approach may vary between lenders.
  • Lenders will not take personal guarantees on facilities up to £250,000, and lenders cannot take a borrower’s principal private residence as security.
  • If a lender can offer finance on normal commercial terms without the need to make use of the scheme, they may do so.

Can I apply for the Recovery Loan Scheme if I’ve had a Bounce Back Loan or borrowed under CBILS or CLBILS?

Yes, your business can apply for finance under the Recovery Loan Scheme (RLS) even if you’ve borrowed under BBLS, CBILS or CLBILS. You might be able to borrow more under the RLS than you have already – though the maximum you can borrow will depend on your lender’s assessment and the scheme requirements.

How much can I borrow?

The amount your business can borrow under the Recovery Loan Scheme depends which type of finance you choose. After 1 January 2022 the revamped scheme allows you to borrow up to a maximum of £2m per business for all types of borrowing, i.e. term loans, overdrafts, invoice finance and asset finance.

What are the interest rates?

The good news is that interest rates for Recovery Loan Scheme are capped at 15 per cent (a lesson learned from the Bounce Back Loan Scheme). As you’d expect, the interest rates you might be offered will depend on the lender and on your business circumstances.

When do I need to pay the money back?

Term lengths depend on the type of finance (product) you choose. 

  • You can borrow for up to six years for term loans and asset finance facilities
  • You can borrow for up to three years for overdrafts and invoice finance facilities.

How does Recovery Loan Scheme differ from the schemes it replaces (i.e. BBLS, CBILS and CLBILS)?

There are two key differences:

  • Interest and fees – you’ll have to pay interest (and fees) from day one under the Recovery Loan Scheme because the British Business Bank will no longer pay your interest and fees for the first 12 months.
  • Loan size – there is no turnover restriction under the Recovery Loan Scheme but the maximum loan amount is capped at £10m for for applications made in 2021, and £2m for applications made from January 1st 2022 onwards.

What is the government guarantee?

The UK Government gives lenders an 80% guarantee for applications made for the Recovery Loan Scheme – until the end of 2021. The revamped scheme, announced at the Autumn Budget 2021 will see the government reducing the guarantee to 70% for applications made on or after 1 January 2022.

The guarantee means that if a business defaults on the loan, the lender can recoup 80% of the outstanding value of the loan from the government (or 70% for applications made on or after 1 January 2021). This guarantee gives lenders confidence to lend to businesses. As the borrower, you are always 100% liable for the debt.

What can the funds be used for?

If your application is successful you can use your Recovery Loan Scheme finance for any legitimate business purpose, for example:

  • managing cash flow
  • buying equipment
  • meeting a one-off cost
  • helping with payroll
  • investing in, for example, marketing
  • growing your business.

Can I refinance my BBLS or CBILS loan, in part or in full?

Yes, if your total financing needs (including any increase) are greater than the minimum facility sizes available under RLS, you can refinance your BBLS or CBILS loan with a Recovery Loan.

If you do re-finance, it will treated as a new application for RLS and will need to meet the scheme’s eligibility criteria. You can re-finance through your existing lender or apply to a different accredited lender.

Since there is no Business Interruption Payment (BIP) under RLS, if you re-finance a BBLS or CBILS facility (partially or in full) you’ll have to forego your remaining BIP entitlement (up to a maximum of 12 months from the outset of the original facility) as part of the re-financing process.

If you have a Bounce Back Loan and are able to refinance under RLS, be aware that borrower protections and scheme eligibility (and terms) under these schemes differ.

The total amount you can borrow, including any additional lending you secure via the re-financing of an existing facility, will depend on two things: a lender’s affordability assessment and the requirements of the scheme.

Can I get a Recovery Loan with bad credit?

As you’d expect, if you have bad credit, you might have fewer Recovery Loan options available to you and the interest rate you can secure is likely to be higher.

That said, even if you’ve been refused credit in the past, you might still be able to apply for the Recovery Loan Scheme. Lenders review each application on their own merits, i.e. on a case-by-case basis, so it may be worth applying, just in case.

Aside from the RLS, you should explore all the finance options available to your business.

Can a sole trader access the Recovery Loan Scheme?

Yes, sole traders can apply for the Recovery Loan Scheme.

In fact, as long as a business satisfies the other eligibility criteria, RLS is open to:

  • sole traders
  • corporations
  • limited partnerships
  • limited liability partnerships
  • co-operatives and community benefit societies
  • any other legal entity carrying out business activity in the UK with business activity operating through a business account.

Bear in mind that your business must generate more than 50% of its turnover from trading activity in the UK (i.e. the sale of goods or services), unless you are applying as a registered charity or further education establishment.

Which lenders are taking part in the new Recovery Loan Scheme?

The British Business Bank (BBB) has to date accredited more than 70 lenders to the recovery loan scheme (RLS).

Bear in mind that not every accredited lender can offer every type of finance. The British Business Bank is still confirming new accreditations so it’s worth keeping an eye on the BBB current accredited lenders page.

  • Adam Bank
  • Allied Irish Bank
  • Aldermore
  • Arbuthnot Latham
  • Arkel Finance Limited
  • ART Business Loans
  • Assetz Capital
  • Atom Bank
  • Bank of Scotland
  • Barclays
  • BCRS Business Loans
  • BLG
  • Boost & Co
  • Business Enterprise Fund
  • Close Brothers
  • Clydesdale Bank
  • Compass Business Finance
  • Conister
  • Coutts
  • Cynergy Bank
  • Danske Bank
  • DSL Business Finance Limited
  • Ebury
  • Enterprise Answers
  • Finance for Enterprise
  • First Enterprise
  • The FSE Group
  • Funding Circle
  • FW Capital
  • Growth Company Business Finance
  • Genesis
  • HTB
  • Heydock Finance
  • Hitachi Capital UK
  • HSBC UK
  • IGF
  • InterBay
  • Investec Bank
  • Iwoca
  • Kingsway Finance
  • Let’s Do Business
  • Leumi ABL
  • Leumi UK
  • Lloyds Bank
  • Maven
  • Mercia
  • Metro Bank
  • NatWest Bank
  • NEL
  • Newable
  • Nucleus
  • OakNorth Bank
  • Paragon
  • RM Funds
  • Santander
  • Scania Financial Services
  • Secure Trust Bank
  • Shawbrook Bank
  • Shire Leasing
  • Simply
  • Skipton Business Finance
  • Social Investment Business
  • SWIG Finance
  • Starling Bank
  • RBS
  • Thincats
  • Time Finance
  • Tower Leasing
  • Triodos Bank
  • UKSE
  • Ulster Bank
  • United Trust Bank
  • Whiterock Finance
  • Yorkshire Bank

When was the scheme announced?

Chancellor Rishi Sunak announced the Recovery Loan Scheme as part of the Spring Budget on 3 March 2021 and announced updates (and a six-month) extension to the RLS scheme on 29 October 2021.

What other government-backed finance schemes are available to businesses post-Covid?

In addition to the Recovery Loan Scheme, which provides debt finance to businesses, the government launched the £375bn Future Fund: Breakthrough in July 2021. This replaced the Future Fund and sees the government investing equity (alongside the private sector) in fast growing R&D intensive companies.

Tips for applying for the Recovery Loan Scheme

  1. Make sure you have a clear idea about of the purpose of the loan and include this in your business plan.
  2. As well as a business plan, you’ll need to get other paperwork together before you make your application. For example, you’ll need to prepare management accounts, financial accounts and information about any business assets. Swoop (and lenders) can use this paperwork to make sure your loan is affordable and viable.
  3. While you can apply directly to a lender, we’d suggest making your application via Swoop as our Funding Managers can identify the right type of borrowing and identify the most relevant lender(s) for your business. We’ll save you from having to contact multiple lenders – so we’ll help you to minimise the number of credit checks.
  4. Unlike earlier Covid-19 loans the British Business Bank is not paying the first year’s interest and fees. Make sure you’ve factored these costs into your forecasts.

Mistakes to avoid when applying

  1. Term loans and asset finance facilities are for six years; overdrafts and invoice financing facilities are for three years. You’ll run into trouble if you don’t make sure the financing you’re applying for matches your cash flow needs.
  2. Don’t borrow more than you can afford. Loans are now available from £1,000 to £2m and there’s no turnover test under the Recovery Loan Scheme. However, you need to know how you’ll repay your loan, especially if you give a personal guarantee (though the lender can’t take security on your principal private residence). So… keep your cash flow forecasts up to date and make sure they are realistic. It’s always a good idea to stress test your forecasts so that you can see how easily you can afford to repay the loan if your trading results aren’t as good as you hoped.
  3. There are over 70 potential lenders and more are joining the scheme every week. They often have more than one type of finance available and some lenders have restrictions on whom they’ll lend to. You’ll want to be certain that you’re applying for the right financing from the right lender or you’ll waste your valuable time. Here at Swoop we’re familiar with all the products on the market so we can save you time that you can instead spend running your business.
  4. Don’t get stung by high interest rates! For example, if your loan application is declined by one lender and you’re offered a loan by another lender, the interest rates could be much higher. This is another reason to apply through Swoop rather than taking the direct approach and applying to multiple lenders.

What do I do if I’ve been rejected for the Recovery Loan Scheme?

If you think a loan is the best option for your business right now – or if you are interested in other types of lending such as invoice finance, asset finance, or a revolving credit facility, keep looking – don’t give up! If you need help navigating what’s out there, your first step is to register with Swoop so that we can match you with the most relevant funding options. We can also help you with equity and grants – and making savings on your everyday costs such as business bank accounts.

Will I need a credit check to apply for the Recovery Loan Scheme?

Yes, lenders will carry out a credit check and possibly a fraud check. The types of checks may vary between lenders. If you have been refused credit in the past, you may still be eligible for RLS.

How do I apply?

It’s simple and fast to apply online via our simple application, where you answer a few questions about yourself and your business.

Apply now

Our funding managers are on hand if you have any questions about this scheme or any other areas of funding – contact us here.

We will keep this page updated as and when the government provides any updates.

Written by

Arabella McAvoy

Arabella is a former BBC business journalist who began her career as a policy analyst at the Bank of England and Financial Conduct Authority, and more recently worked in the communications and policy team at the British Business Bank.

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