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An expert’s guide to the Recovery Loan Scheme

4th May 2023
Brought to you by
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Allica Bank is Britain’s award-winning business bank focused exclusively on supporting established...
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This article is part one of a four-part series from Allica Bank’s Government Lending Scheme Manager David Holdstock about the Recovery Loan Scheme. 

The Recovery Loan Scheme (RLS) is a unique opportunity for British SMEs to unlock growth, but it’s being underused right now. 

recovery loan scheme guide
Allica Bank

From my experience, a big reason for this is that many business owners don’t realise that they could benefit from it or know how it can be used. Based on previous versions of the scheme, there’s an assumption that the RLS can only be used for recovery, which is no longer true. 

As such, I’m eager to break down some of the misconceptions about RLS-backed loans, as it is a potential game-changing scheme to help banks support the established business community with funding. 

What exactly is the Recovery Loan Scheme? 

The Recovery Loan Scheme is a government-guaranteed facility, designed to increase access to funding for trading UK businesses. RLS loans are only available through accredited lenders, such as Allica Bank. 

It’s important to know that the loans are guaranteed to the bank, not the borrower. This means borrowers remain 100% liable for repaying the loan.  

RLS first launched in April 2021, when it was more aligned to the Covid Business Interruption Loan Scheme (CBILS). As CBILS came to an end, the government wanted (and needed) to provide something similar. Over the last two years it has evolved to become a scheme geared around driving business growth, rather than recovery from pandemic, but it can be considered a somewhat distant relative of CBILS. 

Since it first launched, RLS has gone through two further iterations to get to where we are today. 

Iteration one: the initial terms were an 80% guarantee from the government, evidence of coronavirus impact, and a few other security restrictions. 

Iteration two: the second tranche involved a 70% guarantee with evidence of coronavirus impact. 

Iteration three: the latest iteration is a 70% guarantee and no longer requires evidence of impact from the pandemic to qualify. 

The scheme has helped banks open up their lending appetite for SMEs beyond their traditional commercial finance offering. The government is keen for banks to lend and stimulate growth. As such, RLS helps banks become more flexible in their lending — at Allica Bank, for example, it allows us to offer facilities that would be outside our normal credit appetite. 

How you can help as an accountant 

The first person a business owner often turns to when they’re exploring options for funding is their accountant. As such, it’s important to understand the ins and outs of the scheme. 

The scheme has given accredited lenders like Allica Bank the option to finance outside of their normal commercial lending criteria. When your clients have a viable plan but they don’t think they’ll be able to get the finance through the usual channels, RLS could be the difference between a bank being able to help them or not. So it’s important to keep the RLS in mind when talking to clients about their options. 

You should bear in mind, though, that even if your client satisfies the eligibility criteria, they are not entitled to receive an RLS-supported facility – that is a decision for the lender to make. 

Let’s get more businesses growing with the Recovery Loan Scheme 

The RLS helps accredited lenders expand their commercial lending terms and offer new opportunities for businesses to grow and invest. 

My call-to-arms is that, even if you think a bank wouldn’t normally fund something, it’s worth speaking to them in case they can offer it through the RLS. The scheme can be used to support businesses in novel ways – and accredited lenders, the British Business Bank, and the government all want to use this scheme to help businesses invest and grow. 

RLS is a pro-business, pro-growth, and pro-lending scheme. Help your clients make the most of it! 

You can find out more information about the Recovery Loan Scheme on the British Business Bank website here. We’ll also be sharing more in-depth walk-throughs and guides about the RLS on AccountingWeb soon. 

To speak to an Allica Bank relationship manager about how your client might be able to benefit from the Recovery Loan Scheme, click here.

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