Recovery Loan Scheme (latest iteration)

The government’s Recovery Loan Scheme (RLS), which will now run until 2024, supports UK businesses with lending of up to £2m.

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At Swoop, we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. While we adhere to a strict editorial policy, our goal is to simplify complex matters, offer transparent information, unravel jargon, and empower businesses to confidently make smart financial decisions.

Page written by Arabella McAvoy. Last reviewed on April 12, 2024. Next review due April 6, 2025.

The latest iteration of the Recovery Loan Scheme, details of which were published on 1 August 2022, will run for a further two years until 2024, supporting access to finance for UK businesses as they look to invest and grow.

One change from the previous iteration of the scheme is that (for most borrowers) there is no requirement to confirm they have been affected by COVID-19.

The maximum facility size is still £2 million, at least for borrowers outside the scope of the Northern Ireland Protocol, and £1 million for those in scope of the Northern Ireland Protocol. The British Business Bank will continue to administer the scheme on behalf of the Secretary of State for the Department for Business, Energy, & Industrial Strategy (BEIS).

RLS offers a government guarantee for small business lending; the government underwrites 70 per cent of what the lender could lose if a business defaults.

The UK Government launched RLS in April 2021 with the aim of supporting access to finance for UK businesses recovering from the COVID-19 pandemic. It 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%). And on 20 July 2022 the government announced it would be extended further.

By June 2022 there were more than 80 accredited lenders, offering lending for up to six years.

Businesses who decide the RLS is not for them might want to consider alternative finance options, such as merchant cash advances or invoice finance. There are plenty of alternatives to the Recovery Loan Scheme and Swoop is currently able to offer a 12-month, interest-only loan of up to £250,000 through our platform.

If 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.

Andrea Reynolds
Swoop’s CEO & Co-Founder

A word from Andrea

"With the latest iteration of the Recovery Loan Scheme, businesses are no longer required to prove that they were affected by the COVID-19 pandemic. Because of this, many businesses are looking to the RLS in order to better manage cashflow, investment, and growth. If your business previously utilised CBILS, it is also worth taking advantage of the current RLS scheme."

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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.

The previous iteration of RLS, which closed on June 30 2022, aimed to support access to finance for UK businesses recovering from the COVID-19 pandemic.

The current iteration, which opened in August 2022 and will run for two years, removed the need for a business to confirm it has been impacted negatively by COVID-19.

RLS is still designed to be used for business purposes, for example, managing cashflow, investment and growth – and it is open to a broad range of businesses, including to those which had previously taken out a CBILS, CLBILS or BBLS.

RLS replaces 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.

While the Recovery Loan Scheme aims to improve the loan terms available to UK businesses, these terms reflect the protection that the 70% government guarantee offers to lenders. It is worth noting that some businesses might be able to find commercial loans with better terms – or other types of lending – by registering with Swoop.

When did the Recovery Loan Scheme start and when does RLS end?

RLS launched on 6 April 2021 and the new iteration will close in 2024. RLS was initially set to close at the end of 2021 but in Autumn Budget 2021 the Treasury announced it was extending the scheme for six months (until June 30 2022), albeit but with a reduced maximum amount available to businesses and lower government guarantee (see below). In July 2022 the government announced it would extend the scheme for a further two years.

Which businesses are eligible?

From 1 January 2022, the Recovery Loan Scheme was restricted to small and medium-sized enterprises (SMEs), as announced in the Autumn Budget, 2021.

(When it was initially opened, UK businesses of any size could apply for a loan or overdraft. This was the main difference between the Recovery Loan Scheme (RLS) and the various coronavirus finance support schemes it replaces (BBLS, CBILS, CLBILS. )

Businesses have to meet certain criteria in order to access the scheme. Specifically, a business must:

have a turnover of less than £45 million
be carrying out trading activity in the UK
be viable (i.e. the lender must 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 Cpvod-19)
not be in collective insolvency proceedings or any other business difficulty.

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 vary according to the lender.
Lenders may take personal guarantees, in line with their normal commercial lending practices, but Principal Private Residences cannot be taken as security within the scheme.
If a lender is able to offer finance on normal commercial terms without the need to make use of the scheme, it may do so.

Can businesses apply for the Recovery Loan Scheme if they previously had a Bounce Back Loan or borrowed under CBILS or CLBILS?

Yes, businesses can apply for finance under the Recovery Loan Scheme (RLS) even if they previously borrowed under BBLS, CBILS or CLBILS. Some businesses may be able to borrow more under the RLS than they did previously – though the maximum depends on the lender’s assessment and the scheme requirements. Some may be able to borrow less.

How much can each business borrow?

After 1 January 2022 the revamped Recovery Loan Scheme allowed businesses to borrow up to a maximum of £2 million (per business) for all types of borrowing, i.e. term loans, overdrafts, invoice finance and asset finance.

This £2 million maximum remains the same for the new iteration of the Recovery Loan Scheme, until 2024, but only for borrowers outside the scope of the Northern Ireland Protocol. The maximum is now £1 million for those inside the scope of the Northern Ireland Protocol.

Minimum facility sizes vary, starting at £1,000 for asset finance and invoice finance, and £25,001 for term loans and overdrafts.

What are the interest rates?

The annual effective rate of interest and upfront and other fees cannot be more than 14.99%, according to the British Business Bank. As you’d expect, the interest rates you might be offered will depend on the lender and on your business circumstances.

When do businesses need to pay the money back?

Term lengths depend on the type of finance (product) you choose. Businesses can borrow:

up to six years for term loans and asset finance facilities (minimum three months)
up to three years for overdrafts and invoice finance facilities (minimum three months).

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

There are two key differences:

Interest and fees – you have to pay interest (and fees) from day one under the Recovery Loan Scheme because the British Business Bank no longer paid your interest and fees for the first 12 months.
Loan size – the maximum loan amount is capped at £2m for borrowers outside the scope of the Northern Ireland Protocol. From August 2022, the maximum was set at £1 million for those inside the scope of the Northern Ireland Protocol. (The maximum loan amount was previously £10m for applications made before the end of 2021).

What is the government guarantee?

The UK Government originally gave lenders an 80% guarantee for applications made under the Recovery Loan Scheme – until the end of 2021. The revamped scheme, announced at the Autumn Budget 2021, saw the government reducing the guarantee to 70% for applications made on or after 1 January 2022. This 70% remains for applications until the scheme closes in 2024.

The guarantee means that if a business defaults on the loan, the lender can recoup 70% of the outstanding value of the loan from the government (or 80% for applications made before 30 December 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?

Businesses which successfully apply for Recovery Loan Scheme finance can do so 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 the business.

Can a business refinance a BBLS or CBILS loan, in part or in full?

Yes, businesses with total financing needs (including any increase) greater than the minimum facility sizes available under RLS, are able to refinance their BBLS or CBILS loan with a Recovery Loan before 2024, when RLS closes to new applicants.

For businesses which re-finance, applications are treated as new applications for RLS and have to meet the scheme’s eligibility criteria. Businesses are able to either re-finance through existing lenders or apply to a different accredited lender.

Since there is no Business Interruption Payment (BIP) under RLS, any business which refinances a BBLS or CBILS facility (partially or in full) has to forego its remaining BIP entitlement (up to a maximum of 12 months from the outset of the original facility) as part of the re-financing process.

Businesses with a Bounce Back Loan that are able to refinance under RLS should be aware that borrower protections and scheme eligibility (and terms) under these two schemes differed.

The total amount a business can borrow under the RLS, including any additional lending secured via the re-financing of an existing facility, depends on two things: a lender’s affordability assessment and the requirements of the scheme.

Can businesses with bad credit get a Recovery Loan?

As you’d expect, businesses with bad credit have fewer Recovery Loan options available to them and the interest rates they are able to secure are typically higher.

That said, some businesses which had been refused credit in the past have been able to apply for the Recovery Loan Scheme. Lenders review each application on its own merits, i.e. on a case-by-case basis.

If RLS is not an option for your business, you might consider exploring business loan options and indeed other finance options available to your business. Register with Swoop to understand your options.

Can sole traders access the Recovery Loan Scheme?

Yes, sole traders were able to 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.

That said, businesses have to be generating more than 50% of their turnover from trading activity in the UK (i.e. the sale of goods or services), unless they were applying as a registered charity or further education establishment.

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

By the time the Recovery Loan Scheme ended on 30 June 2022, the British Business Bank had accredited more than 80 lenders for the previous iteration of RLS. However, there are now just 8 accredited lenders under the new iteration. This list is maintained by the British Business Bank and will undoubtedly change between now and the closing date in 2024. Lenders currently accredited under the new iteration of RLS include:

Atom Bank
Bank of Scotland
Barclays
BCRS Business Loans
Business Enterprise Fund
CWRT
DSL Business Finance Ltd
Finance For Enterprise
First Enterprise (Enterprise Loans)
FSE Group
Genesis
HSBC UK
Let’s Do Business
Lloyds Bank
NatWest
Robert Owen Banking
RBS
Time Finance.

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. The government also announced a two-year extension on 20 July 2022.

What other government-backed finance schemes are available to businesses post-COVID-19?

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.

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.

Our funding managers are on hand if you have any questions about funding options – contact us here.

Will I need a credit check to apply?

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 a business recovery loan.

Tips for applying for the Recovery Loan Scheme

Make sure you have a clear idea about of the purpose of the loan and include this in your business plan.
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.
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.
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

Term loans and asset finance facilities are for maximum six years; overdrafts and invoice financing facilities are for maximum three years. You’ll run into trouble if you don’t make sure the financing you’re applying for matches your cash flow needs.
Don’t borrow more than you can afford. You’ll 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.
There many potential lenders 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.
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?

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

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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