RLS extension: What does it mean for businesses?

Last week, Chancellor Rishi Sunak confirmed the extension of the Recovery Loan Scheme (RLS) in the Treasury's Autumn Budget. The RLS was initially set close to new applications on 31 December, but will now run until 30 June 2022.

There are some changes to note, however. 

Starting from January 1st 2022, the maximum amount of finance available to businesses through the scheme will drop from £10 million per company to £2 million per company. The government will also lower its guarantee from 80% to 70% and the scheme will only be available for SMEs.

The RLS was launched on 6 April as a follow-up to the Coronavirus Business Interruption Loan Scheme (CBILS). When you apply for RLS finance you can choose to receive the funds in the form of a term loan, invoice finance, asset finance or a business overdraft. 

How popular has the RLS been so far?

The RLS’ terms aren’t as generous as those offered through the CBILS. 

For instance, businesses didn’t have to pay fees or interest for the first 12 months through the CBILS, but they’re required to meet the total cost of interest payments and any fees associated with their RLS facility. 

Stricter terms mean the RLS has seen less take up than the CBILS, and some applicants have been denied finance due insufficient company turnover or credit history. 

Demand for government-backed finance does seem to be increasing though. iwoca’s SME Expert Index for Q3 revealed that prior to the RLS extension, almost 40% of brokers witnessed an increase in demand for the scheme compared to Q2.

One in seven brokers (14%) saw demand increase significantly – submitting 50% or more applications compared to the previous four weeks. Lenders are also still joining the scheme, with Kingsway Finance and Growth Lending recently becoming accredited. 

On 25 October, the British Business Bank, the government-owned bank that manages the RLS, announced that the scheme has passed a significant milestone, with 76 accredited lenders having offered over £1bn to smaller UK businesses.

How can I apply for a recovery loan?

Businesses have until 30 June 2020 to apply for finance through the RLS. If you’re looking for more than £2 million in funding through the scheme, you need to apply before the 1st January 2022. You can apply for RLS finance through the Funding Options platform. 

Funding Options has been chosen by the British Business Bank as a designated platform to find RLS and non-RLS finance for businesses.

Tell us how much you need to borrow, what it's for and provide some basic information about your business. Our team of Business Finance Specialists and our Funding Cloud technology will compare up to 120+ lenders and match you with the right finance options for your needs.

There’s no maximum turnover to access the RLS and businesses operating in most sectors can apply. You can also apply if you’ve already received support from the previous CBILS, CLBILS or BBLS initiatives. 

To be eligible, your business must:

• be trading in the UK

• be viable or would be were it not for the pandemic

• have been impacted by the coronavirus pandemic

Could I refinance my CBILS facility for an RLS one?

If you took out finance through the CBILS you might be able to reduce the amount you pay by refinancing it for an RLS loan or facility. Businesses can refinance their debt with or without increasing the original borrowing.

Refinancing is when you take out finance to pay off previous debts. You might consider refinancing if you want to change your loan rates or lengthen the term of your loan. By refinancing your CBILS loan, you could:

• Reduce the cost of capital – as your business’ revenue and trading period increases and credit score improves, you may be eligible for funding with a lower interest rate.

• Reduce repayments – you could reduce the amount you repay each month as the result of a lower interest rate, increased term or both.

• Consolidate your debt – do you have more than one outstanding loan? Refinancing can enable several debt facilities to be consolidated under one facility.

• Access more funding – again, as your business grows and its revenue/trading period/credit score improves, you might be eligible for a larger amount of funding. 

Simply put, the RLS is designed to help UK businesses access the funding they need to recover and grow during the coronavirus pandemic and following the lockdown. 

The funds can be used for any legitimate business purpose, including managing cash flow, investment and growth. Bear in mind that you might be eligible for other types of business funding on better terms, so it can be worth exploring alternatives using Funding Options.