The scheme was announced during the Budget on 3rd March and is set to replace the previous BBLS and CBILS, and is scheduled to run until 31st December 2021, subject to review.
It will support borrowing of up to £10m for individual businesses and up to £30m per group and, once received, the funds can be used for any legitimate business purpose, including managing cashflow, growth and investment.
It is designed to appeal to businesses that can afford to take out additional finance for these uses.
Businesses can choose from term loans, overdrafts, asset finance and invoice finance, subject to the lender being accredited for each of these finance types.
Minimum facility sizes vary, starting at £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts.
Term loans and asset finance facilities are available from three months up to six years, with overdrafts and invoice finance available from three months up to three years.
Businesses are required to meet the costs of interest payments and any fees associated with the RLS facility.
The annual effective rate of interest and upfront and other fees cannot be more than 14.99%.
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Companies that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme — however, the amount they have borrowed under a previous facility may, in certain circumstances, limit the amount they may obtain under RLS.
Personal guarantees are only permitted for facilities above £250,000.
The highest amount that can be covered is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied.
No personal guarantees can be held over principal private residences.
To be eligible for a RLS loan, borrowers must confirm to the lender that they have been impacted by Covid-19 and must be carrying out trading activity in the UK.
There is no turnover restriction for businesses accessing the scheme.
The lender will consider that the borrower has a viable business proposition but may disregard any concerns over its short- to medium-term business performance due to the uncertainty and impact of the pandemic.
Lenders are required to undertake credit and fraud checks for all applicants, as well as customary checks, such as KYC and AML.
Finance providers previously accredited to provide CBILS have been invited to apply for accreditation for the RLS.
Once accredited, lenders will be listed on the British Business Bank website, with more expected to be announced over the coming weeks.
The bank specifies that if a lender can offer a borrower the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.
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