Written by Jack Cleaver – Business Development Manager
RLS Scheme: How you can benefit
In the Autumn Budget announced, Chancellor, Rishi Sunak, extended the deadline for the Recovery Loan Scheme (RLS). The scheme started in the Spring and was the ‘son of CBILS’ – designed to stimulate lending from banks and borrowing by SMEs to help the national economy recover.
In terms of take-up, the scheme hasn’t been as popular as CBILS, however this article looks at a few ways that depending on your circumstances, Credo Asset Finance could help you to use it to your advantage.
What is RLS?
The Recover Loan Scheme is a guarantee scheme that is provided to lenders to add support to applications from SMEs. The scheme is running across the Asset Finance market, as well as on Invoice Finance, Overdrafts & Term Loans, and can be for up to £10m.
RLS gives the lender a government-backed guarantee against the outstanding balance of the facility. This provides them comfort in the facility and risk taken on in any lending scenario.
If you’re borrowing less than £250,000 the lender won’t take any form of personal guarantee. If you’re borrowing more than £250,000 then lender may take a personal guarantee.
What’s the benefit to me & my business?
The scheme has a few potential benefits to you & your business depending on your circumstances.
- Exposure limits – All lenders operate with exposure limits; this means how much they’re willing to lend to one connection. Using the scheme, they may be willing to increase this limit
- Personal guarantees – To add support to deals, lenders will often ask for personal guarantees as a sign of willingness and commitment to agreements. This could become costly for you in the future if the worst happens, however under the scheme parameters mentioned above, these may not be required when completing a deal with an RLS guarantee.
- Loan To Value (LTV) – Lenders will review the LTV on an asset finance deal on day 1 of the agreement and through the term using depreciation curves. These LTVs may be pushed higher than normal limits due to the RLS guarantee.
When might I use it?
Proposals on the scheme are open until the end of June 2022, so we’ve got just over 7 months to explore this avenue with you. The scheme is open to funding new or used assets and can be used to fund a wide range of business-critical asset types. So, when discussing a purchase with us, we may discuss RLS with you.
It also works well with refinance facilities. This could be used for debt restructure, or to release capital to fund upcoming investment in other areas of your business. As the name suggests, focusing on ‘Recovery’ from the pandemic and the impact to business is the key focus.
- Debt Restructure – Stretching the term of existing facilities to reduce the monthly repayment. Perhaps you have a current agreement with 24 months left to run at £3,000 per month. We could use the RLS scheme to refinance the machine(s) over a further 60-month term at £1,500 per month.
- Release Equity – Either from a machine on finance or from an unencumbered machine, we can look to release the equity from it. Allowing you to invest in the business as required. This is helped in the current market due to higher values of used machinery due to the slow supply of new
If you would like to discuss your business recovery plan, and how the RLS can help, contact Jack on 07593 561413 or e-mail [email protected]
