How Does the Recovery Loan Scheme Work?

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While the coronavirus pandemic was fundamentally a health issue, it has taken a huge socio-economic toll across the length and breadth of the UK. As Recovery Loan Scheme is the focal topic.

Across all government measures, it was thought that between £315 and £410 billion had been spent as of December 2021, with this equating to an average of around £4,700 and £6,100 per person. 

A key driver of this spending is the recently announced and so-called “Recovery Loan Scheme”. But what is this and do you qualify as a business owner? Let’s get into it. 

What is the Recovery Loan Scheme? 

Currently available through many private lending platforms, the Recovery Loan Scheme (RLS) is a funding initiative to support UK businesses that have been impacted by the coronavirus pandemic. 

This year, it will first be made available on April 6th, to help stricken firms recover and restart now that the coronavirus measures have been rolled back. 

There’s no doubt that this will provide a real lifeline to some businesses, just as the same scheme did following the exit from the winter lockdown in April of last year. Certainly, the RLS will offer significant value to stricken hospitality businesses such as pubs and restaurants, especially those that are small and independent by nature. 

The 2022 iteration of the scheme will run until June 30th, 2022, so there’s ample opportunity to apply and receive some much-needed cash support. 

Are you Eligible to Participate in the RLS? 

In general terms, the RLS is available to firms of all sizes and virtually every conceivable industry, while it’s possible to apply for anywhere between £25,001 and £2 million (down from £10 million in 2021) in business loans and agreed overdrafts. 

However, the 2022 initiative has placed a cap in terms of the revenue of applicants, with firms that have an annual turnover of over £45 million unable to apply this year. 

The total amount that you can borrow will also depend in part on your company size and revenue, while it’s also built on the proviso that the business passes all viability, credit and insolvency checks and can share accurate accounts for a concerted period of trading. 

Of course, to receive funding through the RLS your business will also have to be based in the UK, so this is an important consideration before you get started. 

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What are the Benefits of the RLS? 

Aside from providing an immediate and relatively accessible source of funding for businesses that have been directly impacted by Covid-19, there are numerous benefits of applying for the RLS. 

Certainly, this initiative helps with boosting real-time cash flow and driving growth post-Covid, particularly in industries that are reopening tentatively or instances where extended invoice terms (such as 90 days or more) are in place. 

The RLS is also relatively simple and easy to understand from a small business perspective, while some private lenders are also offering this loan on an interest-free basis for the first 12 months. 

The government will also pledge to guarantee as much as 70% of the loan in case you run into financial difficulties. While this is down from the 80% coverage offered last year, it’s still a sizable share that can provide genuine peace of mind for applicants. 

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