The Restore loan scheme is now open for registration. managed by the British investment bank, this is a new scheme to support access to finance for UK businesses as they turn around the COVID-19 health crisis. The scheme, announced in the budget on March 3, 2021, will run until December 31, 2021.
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The new program will allow UK companies to borrow up to £10 million for individual companies and up to £30 million for a group. Funds can be used for any legitimate business purpose, including managing cash flow, growth and investments.
The British Business Bank has been the organization that Reimbursement Scheme (BBLS), Loan arrangement for business interruption due to coronavirus (CBILS), and Loan scheme for large companies coronavirus break (CLBILS). The Recovery Loan Scheme is intended to continue to support smaller businesses.
Features of the scheme include:
- Up to £10 million per company: The maximum amount of a facility provided under the scheme is £10 million per company (maximum £30 million per group). Minimum facility sizes vary, starting at £1,000 for asset and invoice financing, and £25,001 for term loans and overdrafts.
- Wide range of products: Businesses can choose from term loans, overdrafts, asset financing and invoice financing (provided the lender is accredited for each of these financing types).
- Term: Term loans and asset financing facilities are available from three months to six years, with overdrafts and invoice financing from three months to three years.
- Interest and fees to be paid by the company from the outset: Companies must pay the cost of interest payments and any fees associated with the RLS facility.
- Access to Multiple Arrangements: Businesses that have entered into a CBILS, CLBILS, or BBLS facility will have access to the new arrangement, although the amount they borrowed under a previous arrangement may, in certain circumstances, exceed the amount they can borrow under RLS. limit.
- Pricing: The annual effective interest and prepayments and other fees cannot exceed 14.99%.
- Personal guarantees: Personal guarantees are not allowed for facilities of £250,000 or less. Above £250,000, the maximum amount that can be covered under RLS is limited to a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been used. No personal guarantees can be given on primary residences.
- Recovery Loan Scheme-backed facilities are provided at the discretion of the lender.
- Guarantee to the Lender: The scheme provides the lender with a government-backed guarantee for the outstanding balance of the facility. The borrower always remains 100% liable for the debt.
Eligibility criteria include:
- Covid-19 impact: The borrower must confirm to the lender that they have been affected by Covid-19.
- Based in the UK: The borrower must be trading in the UK.
- Viability test: The lender will assume that the borrower has a viable business proposition, but may ignore any concerns about its short to medium term business performance due to the uncertainty and impact of Covid-19.
- Credit and fraud checks for all applicants: Lenders are required to perform credit and fraud checks for all applicants, as well as common checks such as Know Your Customer and Anti-Money Laundering. The checks and approach may differ per lender.
- Turnover limit: There is no turnover limit for companies that make use of the scheme.
How to apply?
Lenders previously accredited to provide CBILS have been invited to apply for accreditation to the Recovery Loan Scheme. Companies are advised to first approach their own lender via the lender’s website. The Bank notes that if a lender can offer a borrower the option of a commercial loan on better terms, without requiring the guarantee from the RLS, it should do so.
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