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Posted: 29 Apr, 2021

At the beginning of April the Government launched its latest initiative, the Recovery Loan Scheme (RLS), to help businesses get back on their feet following the pandemic lockdowns. So far, the scheme is thought to be off to a slow start with the Financial Times reporting that applications were in the “low thousands” in the first few weeks of the scheme. This is perhaps not surprising as businesses could have taken up a BBLS or CBILS only a few weeks ago and there is a good amount of paperwork required to apply. In addition, the British Business Bank only published the eligibility criteria to become accredited for the RLS on 23rd April – more than two weeks after the funding programme was opened.

But as the months go on, it’s expected that applications for the RLS will go up and so here we provide an overview of the loan scheme, how if differs from previous schemes, and what SMEs should consider before applying.


Currently scheduled to run until 31st December 2021, the Recovery Loan Scheme is available through a number of lenders accredited by the British Business Bank. It replaces three previous emergency loans schemes – the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS) – and it can be used as an additional loan on top of support received from these schemes.  Its stated aim is to protect jobs by ensuring additional financial support is available to businesses as Covid restrictions are lifted and the economy gradually re-opens.

Previous coronavirus schemes have had strict criteria around the size of the business applying as well as different amounts available to borrow at each stage but the RLS simplifies this into one offering for businesses of all sizes and stages. Up to £10m is available per business. The minimum funding is £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts.

The loan periods on offer are up to 3 years for overdrafts and invoice finance facilities and up to 6 years for loans and asset finance facilities. There are no personal guarantees on loans of up to £250,000 and above that amount, lenders cannot include Principle Private Residences in the guarantee agreements. Interest rates are also capped at 15%.

How does it differ from previous schemes?

Unlike CBILS and BBLS, interest and fees need to be paid by the business from the outset and the Government is only guaranteeing 80% of the loan amounts which could mean that lenders will be more cautious in approving loans.

Unlike the BBLS, access to the RLS is dependent on stringent affordability checks. Because of this, it’s expected that a large number of SMEs won’t be eligible and will not qualify for a loan. And for some, the very fact that they already took out a BBLS or CBILS might mean they no longer qualify due to affordability. Research even suggests that up to 58% of SMEs in need could be ineligible for the scheme and approval levels could be similar to the levels seen with CBILS at 42%.

However, this might not be a bad thing. Whilst providing a lifeline for thousands of businesses, the Bounce Back Loan Scheme was also widely criticised by those concerned that it would attract fraudsters and lead to a high percentage of defaulters. By requiring lenders to undertake affordability checks before approving a loan, the Government is trying to ensure that the RLS does not facilitate SMEs to take on more debt that they can afford to carry.

What to consider before applying

Affordability is the key thing to consider. Before applying for an RLS, business leaders should take time to assess the long-term viability of the business, as well as the position of all parties including directors, shareholders and creditors. The payment terms are relatively short and so businesses will need to work out whether they can carry the repayments along with any other loan repayments they may need to make.

If applying for more than £250,000 personal guarantees may be sought and directors should take advice to understand the nature and extent of the liabilities being guaranteed before signing on the dotted line. Even if directors won’t lose their house because of the Principle Private Residence exclusion, there are many risks to signing a personal guarantee and these shouldn’t be underestimated.

TMA UK is part of TMA, a global organisation that represents the interests of turnaround professionals as its members who have the skills needed to assist in these unprecedented times. If you need assistance, please contact our helpline on 0844 804 0116

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