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What is Phase 3 of the UK Government's Recovery Loan Scheme (RLS)?

13 November 2023

The Recovery Loan Scheme (RLS) is a government-backed funding solution that is designed to provide financial support to businesses that have been affected by the economic impact of events such as the COVID-19 pandemic. The RLS aims to help smaller UK businesses with a turnover of up to £45 million access financial properties they may not otherwise have had access to, such as cash flow, growth and investment opportunities.

What are the key features, and is your business eligible for RLS phase 3? In this article, we will explore:

  • Why use the recovery loan scheme?
  • What is the difference between Phase 2 and Phase 3?
  • Key features of RLS
  • Breakdown of RLS
  • Check your eligibility
  • How to apply for the recovery loan scheme in Phase 3
  • What happens if you fail to repay the loan?

Why use the recovery loan scheme?

RLS loans intend to help businesses recover and stabilise by offering favourable terms and conditions, often with lower interest rates and extended repayment periods. Any UK business not subject to the Northern Ireland Protocol is able to apply for RLS Phase 3. The timeline of the RLS phases is as follows:

Phase one: 6th April 2021 - 31st December 2021

Phase two: 1st January 2022 - 30th June 2022

Phase three: from August 2022

Other benefits of the recovery loan scheme include:

  • Easy access to capital
  • Offer of financial stability
  • Offers asset finance for equipment purchases
  • It is backed by the government
  • It gives your business support to grow

What is the difference between Phase 2 and Phase 3?

While some facilities of the recovery loan scheme share similarities, it is worth noting that Phase 3 includes key updates from Phase 2. 

The differences are outlined below:

FeaturesPhase 2Phase 3
Maximum value £2 million per business, and £6 million per business group.

£2 million per business group for borrowers not subject to the Northern Ireland Protocol.

Or up to £1 million for business groups in line with the Northern Ireland Protocol. It is worth noting that businesses within this sector may have lower limits.

Personal guarantee Not eligible for facilities below £250,000, with a cap at 20% outstanding balance for lending more than £250,000. Permitted for facilities of all sizes.
Impact of COVID-19 Businesses must declare that they have been impacted by the effects of the COVID-19 pandemic. Businesses do not have to declare the impact of COVID-19.
Use of administered guarantee schemes May have accessed other UK guarantee schemes, although the total amount borrowed needs to include the Coronavirus Business Interruption Loan Scheme (CBILS). CBILS and RLS schemes offered before 30th June 2022 do not impact the maximum amount to borrow

The amount that a business with a turnover of up to £45 million can borrow remains as it was, as well as the 70% Government guarantee to the lender.

Key features of RLS

If you are looking to increase the funding for your working capital, expand or even diversify your business, a recovery loan scheme may be effective for your company’s goals. 

Other key features of the RLS include:

Guarantee to the lender: an RLS guarantee provides the lender with a 70% backed guarantee by the government against the outstanding balance of the facility after it has completed its recovery process. The borrower will always remain 100% legally responsible for the debt.

Loan length: if you acquire a term loan or asset finance support, these facilities are available from three months to up to six years. For overdrafts and invoice finance, the term is between three months and three years.

Offers a variety of services: an RLS can support you with your assets, invoice finances and overdrafts. However, not all lenders can offer all services.

Personal guarantee: a personal guarantee can be taken in line with the lender’s commercial lending practices. 

Prices and rates: depending on the lender, interest rates and fees you are charged will depend on the lending agreement. The price will take into account the government guarantee benefit.

Breakdown of Recovery Loan Scheme Options

At Union Business Finance we can provide the following options for the recovery loan scheme, including:

  • Professional Loans From £20,000 - £500,000
  • Commercial Loans From £20,000 - £500,000
  • Equipment Finance From £10,000 - £1 Million
  • Terms 4-5 Years
  • Interest Rates from as low as 8.9%

Check your eligibility

To check if you can apply for phase 3 of the recovery loan scheme, the criteria includes:

That your business has a turnover of up to £45 million.

You are a UK-based business: the business borrowing the loan carries out trading activities in the UK. 

Viability test: The lender must know about the borrower’s viable business proposition, and is able to disregard any concerns over business performance due to the impact of COVID-19.

You are not a business in difficulty: you may be a business in difficulty if you show poor credit and are subject to a very high credit risk.  

Subsidy limits: all borrowers in receipt of the RLS must be provided with a written statement that confirms the type of support needed.

How can you apply for the phase 3 recovery loan scheme?

An RLS scheme is available from accredited lenders, such as banks and loan companies.

What happens if you fail to repay the loan?

Similarly to other loans, if you fail to repay the RLS then your business remains 100% liable for the debt, leading to liquidation. If you agreed on a personal guarantee, this would also be an insolvency.

Get a business loan with Union Business Finance

At Union Business Finance, our team of trusted experts can help you find the best financial solution for your business with our wide range of loans to help your company grow. We pride ourselves on our easy application process and quick turnaround time.

Our bespoke business loans include:

  • Instant business loans
  • Short-term business loans
  • Business cash flow loans
  • Acquisition loans

Contact us today for more information.

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Aintu Ltd T/A Union Business Finance is an independent Asset finance broker not a lender, as such we can introduce you to a wide range of finance providers depending on your requirements and circumstances. We are not independent financial advisors and so are unable to provide you with independent financial advice. Aintu Ltd T/A Union Business Finance will receive payment(s) or other benefit from the finance provider if you decide to enter into an agreement with them. Aintu Ltd T/A Union Business Finance is an appointed representative of AFS Compliance Ltd which is authorised and regulated by the Financial Conduct Authority under number 625035. Aintu Ltd T/A Union Business Finance aims to provide our customers with the highest standards of service. If our service fails to meet your requirements and you would like to report a complaint; please click on the link below;


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