CHECK OUT THE RECOVERY LOAN SCHEME

RECOVERY LOAN SCHEME

About the scheme

The Recovery Loan Scheme (RLS) is a government-backed loan scheme designed to support access to finance for UK businesses as they look to invest and grow.

It can support facility sizes of up to £2 million for borrowers outside the scope of the Northern Ireland Protocol1. Borrowers in scope of the Northern Ireland Protocol may borrow up to £1 million, unless they operate in a sector where aid limits are reduced – in which case the maximum that can be borrowed is subject to a lower cap. These include agriculture, fisheries / aquaculture, and road freight haulage.

Businesses can use the finance for any legitimate business purpose – including managing cashflow, investment and growth. However, businesses must be able to afford to take out additional debt finance for these purposes.

The British Business Bank administers the scheme on behalf of the Secretary of State for Business and Trade.

 

Key features of the scheme:

The Recovery Loan Scheme aims to improve the terms on offer to borrowers. If a lender can offer a commercial loan on better terms, they will do so.

Key features include:

Up to £2 million per business group: The maximum amount of a facility provided under the scheme is £2 million per business group for borrowers outside the scope of the Northern Ireland Protocol, and up to £1 million per business group for Northern Ireland Protocol borrowers2. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts;
Wide range of products: RLS supports term loans, overdrafts, asset finance and invoice finance facilities. Not all lenders will be able to offer all products;
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;
Access to multiple schemes: Businesses that took out a Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) or RLS facility before 30 June 2022 are not prevented from accessing RLS, but in some instances borrowing under these schemes may reduce the maximum amount the borrower is eligible for;
Pricing: Interest rates and fees charged by lenders will vary and will depend on the specific lending proposal. The lender’s pricing will take into account the benefit of the Government guarantee;
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;
Decision-making delegated to the lender: RLS-backed facilities are provided at the discretion of the lender. Lenders are required to undertake their standard credit and fraud checks for all applicants.
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. More information on subsidies is available here.

Eligibility criteria include:

Turnover limit: The scheme is open to smaller businesses with a turnover of up to £45m (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 businesses3, generating more than 50% of its income from trading activity;
Viability test: The lender must consider that the borrower has a viable business proposition but may disregard (at its discretion) 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 relevant 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.
References:

1. The Northern Ireland Protocol has now been amended by the Windsor Framework, a legal agreement which changes how the Northern Ireland Protocol operates. References to the “Northern Ireland Protocol” throughout these pages should be understood accordingly. For more details on this, please see https://www.gov.uk/government/publications/the-windsor-framework.
2. All borrowers will need to answer some questions to determine whether they are inside or outside the scope of the Northern Ireland Protocol. For borrowers in scope of the Northern Ireland Protocol the maximum amount they may borrow is £1m 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. These include agriculture, fisheries / aquaculture and road haulage.
3. Charities and Further Education colleges are exempt from complying with this criterion for facilities offered after 9 March 2023

 

 

 

The Recovery Loan Scheme (RLS) Phase 3 is a Government backed initiative designed to support eligible UK businesses to survive, recover and grow.

At a glance – RLS with HSBC:
For all amounts we will review security requirements on an individual basis. If security requirements (including personal guarantees) are deemed appropriate we will discuss and agree with customers as part of our credit approval process.

Existing business assets may be taken to secure a RLS Phase 3 loan.

There is no fee required to be paid by you for the Government guarantee.

The RLS Phase 3 scheme is open to new and existing customers.

The RLS Phase 3 scheme will be available until 30th June 2024.

The scheme will only be open to businesses with an annual group turnover of £45,000,000 or less.

The timing for processing applications will vary and are subject to receipt of some supporting documentation and information (such as the list below):

Cash flow forecast
Business plan
Latest Annual accounts
Capital repayment holidays are available for up to 24 months throughout the life of the loan from drawdown, subject to status.

A Government guarantee which secures bank loans to any viable business with a sound borrowing proposal.

The RLS Phase 3 loan can be used where we would either:

not have been prepared to offer a Commercial Facility for the same amount on similar terms; or
would only have been prepared to offer a Commercial Facility on similar terms at a higher price.
Any UK business not subject to the Northern Ireland Protocol can apply for a RLS Phase 3 loan of between £25,001 and £2,000,000 subject to (i) eligibility and viability assessments and (ii) previous relevant subsidy amounts received by you or any member of your group.

Any UK business that is subject to the Northern Ireland Protocol can apply for an RLS Phase 3 loan between £25,001 and £1,000,000 subject to (i) eligibility and viability assessments and (ii) previous relevant subsidy amounts received by you or any member of your group and (iii) specific sector sub-limits as mentioned further in the Eligibility section below.

Loan term from 1 year up to a maximum of 6 years.

A loan arrangement fee of 1.5% of the facility amount is payable for RLS Phase 3 loans of between £25,001 and £299,999 and is negotiable for RLS Phase 3 loans between £300,000 and £2,000,000.

No loan prepayment fee should you wish to repay early (although fixed rate breakage costs may be payable for fixed rate RLS Phase 3 loans of £300,000 and above.)

Variable and fixed interest repayment options available, subject to amount borrowed and loan term.

Key Benefits
Businesses that have received support under the previous Government COVID19 guaranteed loan schemes are still eligible to access finance under this scheme, subject to eligibility and limitations.

Funding to support your business to survive, recover and grow.

Capital repayment holidays available on an RLS Phase 3 loan where needed, subject to approval.

Repayments will be higher and more interest payable when capital repayment holidays are taken.
Quick Check RLS Eligibility Criteria
Is your business turnover or, if applicable, the aggregate turnover of your group for the last financial year less than £45,000,000 or forecasted to be less than £45,000,000 where your business has been trading for less than 12 months?
Is your business based in the UK?
Will the funding you require be used to support business activity within the UK?*1
Is over 50% of your group’s business turnover generated from trading activity?*2
If you are a registered charity or a further education college, has your business been impacted by Covid19?*3
Do you operate in an eligible sector*4?
If you are not subject to the Northern Ireland Protocol, is the amount you require to borrow between £25,001 and £2,000,000?*5
If you are subject to the Northern Ireland Protocol, is the amount you require to borrow between £25,001 and £1,000,000?*6
Is funding required for 6 years or less?
You must not be a business in difficulty*7
You understand that you will be liable for 100% of any facility that may be provided, and that HSBC will always seek to recover the outstanding balance of any facility from you and the proceeds of any security you, or any security provider on your behalf, has given for the loan.
An RLS Phase 3 loan must not be used in support of export related activities.
*1 If you are a registered charity or a further education college, on or prior to 31 December 2022, and you obtain a RLS Phase 3 loan, then this criterion will be satisfied if you are or will be engaged in activities in the UK upon first draw down of that RLS Phase 3 loan.

*2 “Trading Activity” means any trading or commercial activity that generates turnover (whether or not such activity is carried on with the intention of making a profit).

*3 This criterion will apply will apply to any applications received by registered charities or further education colleges on or prior to 31 December 2002 and will not apply on and from 1 January 2023.

4The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state funded primary and secondary schools.

*5 If you are not in scope of the Northern Ireland Protocol, the maximum RLS Phase 3 loan amount of £2,000,000 may be reduced if you or any member of your group have received certain previous subsidies. We will require you to confirm the relevant subsidy (if any) you or any member of your group have received as part of your application.

*6 If you are in scope of the Northern Ireland Protocol, the maximum RLS Phase 3 loan amount of £1,000,000 may be reduced if you or any member of your group have received certain previous subsidies and/or are in one of the following sectors, which will be subject to maximum loan amount sub-limits as follows: £110,000 for agriculture, £170,000 for fishery and aquaculture and £570,000 for road haulage. We will require you to confirm the relevant subsidy (if any) you or any member of your group have received and whether your business is in one of these sectors as part of your application.

7 Please refer to the Business in Difficulty section in the FAQs for further information.

 

Important Information
You are liable for repaying 100% of the loan and HSBC will always seek to recover the outstanding balance from you and any security you, or any security provider on your behalf, has taken under the loan.
For all RLS Phase 3 loans we will review security requirements on an individual basis. If security (including a personal guarantee) is deemed appropriate we will discuss and agree with customers as part of the credit approval process.
It is not necessary for you to hold a Business Current Account with us in order to apply for or maintain an RLS Phase 3 loan, unless we are seeking a debenture or fixed charge over book and other debts as security for the loan.
Eligibility is also subject to you not having breached the terms of any loans made available under the existing Government COVID19 guaranteed loan schemes, or the Enterprise Finance Guarantee scheme.
Businesses that have taken out a CBILS, CLBILS, BBLS or previous RLS facility are able to access the new scheme although the amount they have borrowed under a previous scheme may in certain circumstances limit the amount they may borrow under RLS Phase 3.

 

 

Important Information
The standards for lending Practice for business customers
Find out what you can expect when you borrow from HSBC.

Find out more
Guide to business borrowing
Get help choosing the right type of loan and preparing a strong application

Find out more
Appeals for borrowing
If your lending application is declined, find out how you can appeal the decision
Find out more
£15 billion lending fund
If you’re ready to take your business to the next level, come and talk to us about our £15 billion lending fund for small businesses.
Find out more
Green SME Cashback Fund
You can apply for cash back from the Green SME Cashback Fund, if the loan supports an eligible purpose

 

 

 

 

 

 

General Information
What is the Recovery Loan Scheme Phase 3?

The RLS Phase 3 is designed to support eligible UK businesses to survive, recover and grow in order to aid the UK economic recovery from the COVID19 pandemic. Customers requesting a RLS Phase 3 loan are required to confirm viability and affordability in line with our standard credit assessment.

Please be aware that you’re liable for the entire loan amount. We’ll seek to recover the outstanding balance of your loan from you, as well as the proceeds of any security you, or any security provider on your behalf, has given for the loan. Only after this will we look to realise the government guarantee.

 

How long will the RLS be available for?

RLS Phase 3 will be available until 30th June 2024.

 

Can I still obtain a BBL, CBIL, CLBIL or previous RLS loan?

No, these schemes closed on 31st March 2021 in the case of BBLS, CBILS and CLBILS. RLS Phase 1 closed on 31st December 2021 and RLS Phase 2 closed on 30th June 2022.

 

I have a question on RLS Phase 1 or RLS Phase 2?

Please refer to the Contact Us link at the bottom of this page for further support and assistance.

 

 

 

Will I have to provide a personal guarantee or my home as security?

For all RLS Phase 3 loans we will review security requirements on an individual basis. If security (including a personal guarantee) is deemed appropriate we will discuss and agree requirements with you as part of the credit approval process.
Regardless of the size of the loan, a personal guarantor’s principal private residence will not be used as security for a RLS Phase 3 loan.
You do not need to open a bank account to obtain a RLS Phase 3 loan or maintain your bank account with HSBC, unless we are seeking a debenture or fixed charge over book and other debts as security for the loan.
If your business is experiencing financial difficulty, please review www.business.hsbc.uk/en-gb/financial-difficulty and contact us to discuss how we may be able to help.

 

Can I request an Interest or Capital Holiday?

Interest is payable upon drawdown and must be serviced by the borrower.
Capital Repayment Holidays are available up to 24 months, subject to our standard credit assessment, purpose of the request and viability.

 

 

 

 

 

 

 

 

 

What are the eligibility criteria?

Please see the ‘Quick check RLS eligibility criteria’ section on this page.

 

Am I guaranteed to be eligible for a RLS Phase 3 Loan?

Unfortunately, we can’t guarantee that you’ll be eligible.

You must be an existing HSBC business customer or complete our on boarding procedures so we can provide your loan.

You must meet the scheme rules which are set out in the eligibility criteria here.

 

Do I need to provide evidence that I have a viable business?

Yes. You must show in your borrowing proposal that your business will generate sufficient income to meet the repayments of the business liabilities. We will then assess your borrowing proposal using our normal lending criteria.

 

Who will be classed as part of the same group as me?

Enterprises having at least one of the following relationships with each other will be classed as part of the same group:

(A) one enterprise has a majority of the shareholders’ or members’ voting rights in another enterprise;

(B) one enterprise has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of another enterprise;

(C) one enterprise has the right to exercise a dominant influence over another enterprise pursuant to a contract entered into with that enterprise or to a provision in its memorandum or articles of association;

(D) one enterprise, which is a shareholder in or member of another enterprise, controls alone, pursuant to an agreement with other shareholders in or members of that enterprise, a majority of shareholders’ or members’ voting rights in that enterprise; or

(E) an enterprise is otherwise able, directly or indirectly, to control or materially to influence the policy of another enterprise as regards carrying on an economic activity that entails offering goods or services on a market, even if the enterprise does not have a controlling interest in that enterprise.

For this purpose, an ‘enterprise’ refers to any entity or person engaged in an economic activity, irrespective of its legal form. Enterprises having any of the relationships referred to in points (a) to (e) above through one or more other enterprises shall also be considered to be a single group.

 

I have or a member of my group has received a subsidy in the past, can I still get a loan?

Yes, as long as you meet the scheme’s eligibility criteria. Any previous subsidy received by you or any member of your group, however, may impact your eligibility for RLS Phase 3 and may reduce the maximum loan amount you would be eligible for under RLS Phase 3.

 

What sectors are ineligible for RLS?

The following trades and organisations are not eligible to apply: Banks, Building Societies, Insurers and Reinsurers (but not insurance brokers); The public sector including state funded primary and secondary schools.

 

What percentage of my annual turnover must be generated by trading activities to be eligible for RLS?

You must be generating together with your group more than 50% of your income from trading activity. RLS is not designed to support shell companies or investment companies. Trading Activity is defined as any activity that generates turnover (whether or not such activity is carried on with the intention of making a profit). Please note, if you are a registered charity or further education college, and we offer you a loan on or prior to 31 December 2022, then this criterion will be satisfied if you are or will be engaged in activities in the UK as at the initial draw down date of that loan.

 

Is there a maximum turnover?

The maximum turnover is £45,000,000.

 

Are there any limitations?

If you are not in scope of the Northern Ireland Protocol, the maximum RLS Phase 3 loan amount is £2,000,000 however this may be reduced if you or any member of your group have received previous relevant subsidies. We will require you to confirm the relevant subsidy (if any) you have received as part of your application.

If you are in scope of the Northern Ireland Protocol, the maximum RLS Phase 3 loan amount is £1,000,000 however this may be reduced if you or any member of your group have received previous relevant subsidies and/or are in one of the following sectors, which will be subject to maximum loan amount sub-limits as follows: £110,000 for agriculture, £170,000 for fishery and aquaculture and £570,000 for road haulage. We will require you to confirm the relevant subsidy (if any) you or any member of your group have received and whether your business is in one of these sectors as part of your application.

 

How should I calculate trading activity and turnover for start ups?

For start-ups, or SMEs which have traded for less than 12 months, you should estimate this based upon your business forecasted turnover for the first 12 months of trading.

 

Are there any sector specific considerations that I need to consider when applying for a loan?

Sector specific considerations are applicable when considering whether your business is within scope of the Northern Ireland Protocol. These apply to businesses active in the agriculture, fishery and aquaculture and road haulage sectors.

 

 

 

What type of businesses will be captured by the “business in difficulty” definition?

A business will be considered a business in difficulty if it meets one or more of the following features:

(A) if it holds a credit rating, it has a long-term issuer or debt rating below Credit Quality Step 5 from a recognised rating agency; or

(B) if the applicant does not hold such a rating, an applicant, is considered by us to be:

of poor credit standing; or
subject to very high credit risk; or
the applicant is subject to Relevant Insolvency Proceedings.
For the purposes of Relevant Insolvency Proceedings this means the following UK proceedings:

(A) winding-up by or subject to the supervision of the court;

(B) creditors’ voluntary winding-up (with confirmation by the court);

(C) administration, including appointments made by filing prescribed documents with the court;

(D) voluntary arrangements under insolvency legislation; and

(E) bankruptcy or sequestration.

The ‘voluntary arrangements’ listed above include company voluntary arrangements and individual voluntary arrangements. Receiverships, members’ voluntary liquidations, restructuring plans under Part 26A of the Companies Act 2006 and schemes of arrangement under Part 26 of the Companies Act 2006 are not Relevant Insolvency Proceedings.

 

 

 

 

Application Information
Where do I go to apply for the RLS?

You can apply online by using our RLS application portal. Please review all of the information on the portal and upload the required documents to assist us with your borrowing request.

 

How quickly are these loans approved?

RLS loans will be assessed through our normal credit assessment process. Where approved, and if terms and conditions are satisfied, we will endeavour to make the loan available for drawdown as soon as possible.

The Recovery Loan Scheme is managed by the British Business Bank on behalf of, and with the financial backing of, the Secretary of State for Business, Energy & Industrial Strategy. British Business Bank plc is a development bank wholly owned by HM Government. It is not authorised or regulated by the PRA or the FCA. Visit http://www.british-business-bank.co.uk/recovery-loan-scheme.

 

 

 

 

How it can help

The Recovery Loan Scheme: how recovery loans can help your clients

The Government’s latest business support scheme is designed to help SMEs achieve a meaningful recovery. But which clients should you advise to apply?

Helping your business clients survive the past 12 months hasn’t exactly been a walk in the park. The negative impacts of the COVID-19 pandemic and the aftermath of Brexit have left many UK businesses in a complicated financial situation. Revenues are down, cash flow is poor and working capital is in short supply. So, it’s excellent news that the Government has introduced the new Recovery Loan Scheme – with the aim of driving the recovery of the UK economy.

Viable UK businesses can now apply for up to £10 million in funding through the scheme. This provides a potential lifeline for many cash-poor businesses. Various routes to finance are available with funding offered on extremely favourable terms.

But how can a recovery loan be used to add the most value for your clients? And how do you decide which clients would benefit most from this additional funding channel? Let’s take a look.

What is the Recovery Loan Scheme?

The Recovery Loan Scheme (RLS) is a new government-backed scheme offering between £1,000 and £10 million in finance to UK registered companies. It’s designed to help businesses who have been impacted by the pandemic get back on their feets as the economy starts to recover too.

The scheme was introduced on6 April 2021 and is planned to run until 31 December 2021. It replaces the now closed Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS). This makes RLS the go-to route for clients who need to stabilise and grow their business.

Term loans, overdrafts, invoice finance or asset finance are all offered under the scheme. The amounts that can be borrowed depend on the product being used.

For example:

Term loans or overdraft – businesses can borrow between £25,001 and £10 million
Invoice finance or asset finance – businesses can borrow between £1,000 and £10 million
Are my clients eligible for the scheme?

Not all of your clients will be eligible for RLS. To begin with, any interested clients will need to be a UK registered company to qualify for the scheme. However, unlike with CBILS and BBLS, there are no turnover restrictions.

The scheme is open to most industries, however there are exceptions. UK-based banks, building societies, insurers and reinsurers, public-sector bodies or state-funded primary and secondary schools can’t apply. And, as with the CBIL and BBL schemes, there are certain conditions that a business must meet before a recovery loan application can be started.

The client must be able to show that their business:

is viable or would be viable were it not for the pandemic
has been impacted by the coronavirus pandemic
is not in collective insolvency proceedings
Meeting these criteria is somewhat subjective – the meaning of ‘viable’ in this context is open to debate. But this is a golden opportunity for clients to boost working capital and invest in their long-term stability and growth.

Which clients will most benefit from a recovery loan?

Most businesses will benefit from a cash injection. But to maximise the value of a recovery loan, you need to think carefully about each client’s specific situation.

What is the client’s current financial position? How badly were they affected by lockdown? What plans do they have for the future? All of these questions (and more) need to be addressed in order to help business owners make the right decisions about their recovery.

As a starting point, take time to review your client portfolio. Look at their financial metrics and think back to the conversations you’ve had with those clients about pinch points and concerns. With this information front of mind, you can easily identify the clients that would most benefit from additional finance.

Focus your efforts on:

Clients that are currently cash-poor due to COVID-19 – for businesses that have been hardest hit by the pandemic, there will be an overwhelming need for extra cash. A recovery loan will help to build up their cash reserves, and will enhance their working capital. With more liquidity in the business, clients can open up their operations, fund their initial expenditure and start a meaningful recovery.
Clients whose cash is tied up – in the current economic situation, some businesses will be hindered by unpaid invoices and bad debt on their balance sheet. Taking out a recovery loan will allow them to fill this cash flow gap in the short-term. It buys them time while they wait for their debtors to settle these outstanding debts.
Clients that have pivoted or diversified during lockdown – if the client’s business purpose has changed over the course of the pandemic, cash might be needed to fund this diversification. For example, a coffee shop may have decided to purchase a mobile coffee van during lockdown. A recovery loan will help to repay that investment and also replenish the company’s cash reserves.
Clients that are planning to buy new equipment – if a client has plans for a significant asset purchase, a recovery loan could be the ideal route to finance this. When new equipment, plant or technology is needed, taking out asset finance via the RLS is a sensible step. The favourable interest and personal guarantee terms make it easier for clients to buy the asset and start seeing the benefits.
Clients that intend to scale up and grow – some clients may have weathered lockdown well, and will already be in a position to think about growth. Taking out a recovery loan will help them to access the required growth funding on terms that are unlikely to be available at any other point in time. The fact that a recovery loan is interest-free for the first 12 months makes this scheme extremely attractive for most owners.
How can my clients access a recovery loan?

Given the unpredictable nature of the business market, the RLS may well be a game-changer for many of your business clients. Where there’s a pressing need for funding, there’s unlikely to be a more attractive option for taking out additional finance.

A range of banks, finance providers and lenders have now been approved to offer recovery loans via RLS. At MarketFinance, we’re excited to be helping UK businesses kickstart their post-pandemic growth. Sign up here to be the first to know how we can help your clients recover.
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