Recovery Loan Scheme deadline extended

Rishi Sunak has extended the deadline for the Recovery Loan Scheme (RLS) by six months to 30 June 2022.

While the announcement was widely expected, it is always good to see these things officially confirmed.

The RLS includes a government backed guarantee on loans from £25,000 - £10m. Loans are available from 75 accredited lenders for a wide variety of purposes and are certainly worth exploring if you have growth or recovery ambitions following the pandemic. We have seen loans agreed for mergers and acquisitions, asset purchases, property developments, working capital, and more besides. You can find full details of the Recovery Loan Scheme in our dedicated blog.

Total lending agreed under the scheme so far has recently gone through the £1bn barrier, which is modest when compared with the £74bn take-up of the more advantageous CIBLS and BounceBack Loan Schemes that went before it. Only a little over 5,000 businesses have tapped into the scheme to date.

To a degree, the caution is understandable. A report from Lloyds Bank shows that many small businesses are holding back on investment because of their existing obligations surrounding debt repayments. 55% of businesses have now commenced scheduled payments on CIBLS and BBLS facilities, and this number will increase rapidly every month. The good news, however, is that despite the pandemic creating a big increase in borrowing levels, only 11% are indicating that they are worried by the current levels of debt and most are starting to look beyond the pandemic.

If you are among the 11% that is concerned, one short-term option under the BBLS is the 'Pay as You Grow' scheme, which allows you to take another 6-month repayment holiday. We have a full blog on this for you to read.

Another option is to consolidate existing borrowing into a new RLS facility with the repayment terms aligned to the cash flow generation of the business in its current form. The downside of doing this is that you will lose some of the advantages of the CIBLS and BBLS schemes, but it might be a price worth paying. Cash could also be realisable against assets owned in the business in the form of plant and machinery, stock or the debtor book.

If you would like to explore your options with any of the topics raised in this article, please contact us.

Recovery Loan Scheme deadline extended

By: Neil Edwards

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