Recovery Loan Scheme - RLS

The Recovery Loan Scheme (RLS) is a government scheme aimed at supporting access to finance for UK businesses and can be used for business purposes, including managing cash flow, investment and growth.

It is designed to support businesses that can afford to take out additional finance for these purposes. Businesses who have taken out a Coronavirus Business Interruption Loan (CBILS), a Coronavirus Large Business Interruption Loan (CLBILS) or a Bounce Back Loan (BBLS) facility are able to access the new scheme.

Subject to our lending policy, businesses can borrow between £250k and £2 million (with lower maximum loan amount restrictions applying to borrowers in scope of the Northern Ireland Protocol), available with loan terms of up to six years and with satisfactory security being put in place for the loan.

The loan can be used for business investment, to refinance existing debt, and for cash flow purposes.

The Scheme provides Atom bank with a government-backed 70% guarantee against the outstanding balance of the facility. Please be aware that your customer will remain liable for the entire loan amount. We will seek to recover the outstanding balance of their loan from them, as well as the proceeds of any security they, or any security provider on their behalf, has given for the loan. It is only after this that we will look to realise the government guarantee. Businesses will also be required to meet the costs of interest payments and any fees associated with the facility from the outset.

Atom bank will be required to undertake standard credit, fraud, Anti-Money Laundering (AML) and Know Your Customer (KYC) checks for all applicants. When making our assessment, we may disregard concerns over short to medium term performance owing to the pandemic.

The Scheme is open to most businesses who meet the eligibility criteria and have a turnover of up to £45 million per annum per borrower group.

A business with an existing facility under the:

• Bounce Back Loan Scheme (BBLS)
• Coronavirus Business Interruption Loan Scheme (CBILS)
• Coronavirus Large Business Interruption Loan Scheme (CLBILS);
• Recovery Loan Scheme Phases 1 & 2 (RLS 1 & 2)

can still access the new Scheme, providing it is eligible and its total borrowing is within our affordability assessment. Please note that the total amount of subsidy received by the customer may affect the maximum amount they can borrow.

To be eligible for a facility under the Recovery Loan Scheme, a business must meet certain eligibility criteria including but not limited to:

• Its business activity must be UK-based and it must generate more than 50% of its turnover from trading activity (registered charities and further education establishments are exempt from this requirement). This includes income from investment/rental properties;
• It must be engaged in trading activity in the UK at the time it draws down the facility;
• It must provide a borrowing proposal that we consider viable. We may choose to disregard any concerns over a business’s short to medium term business performance due to the uncertainty and impact of COVID-19 in our assessment;
• It must not be in collective insolvency proceedings;
• A borrower cannot be a bank/ building society; an insurer or reinsurer (can be an insurance broker); a public-sector body; a state funded primary or secondary school; or an individual other than a sole trader or a partner acting on behalf of a partnership.

The scheme is open until 30th June 2024, subject to review by the British Business Bank.

Yes, we want to support new borrowers as well as our existing customers. Taking part in the Scheme means we can offer loans to small and medium businesses (SMEs) in these uncertain times.

Please submit your customer’s application via Portal (you will need to register with us if you haven’t already done so) including the RLS Supplementary form, as well as a Data Protection and Disclosure Declaration for all applicants (plus any Personal Guarantors). We will also ask you to provide the following supporting documents with their application:

• Latest 2 years complete accounts, including P&L (for trading businesses)
• Up to date management accounts (where the filed accounts are older than 9 months)

Please refer to our BBSL & RLS Application Checklist when you’re putting together an RLS application to ensure that all required documents are included. If anything is missing, it may slow down the application process.

If Atom can offer a commercial loan on equivalent terms without the need to make use of RLS, we may do so.

A Business is considered to be in difficulty if it has one of more of the following features:

• It holds a credit rating, with a long-term issuer or debt rating below Credit Quality Step 5 from a recognised rating agency; or
• It does not hold such a rating but is considered by the Lender to be:
  • Of poor credit standing; and
  • Subject to very high credit risk; or
• The borrower is subject to Relevant Insolvency Proceedings.

We take all these elements into account in assessing an application through our standard processes in any case.

‘Relevant Insolvency Proceedings’ means the following UK proceedings:

• Winding-up by or subject to the supervision of the court;
• Creditor’s voluntary winding-up (with confirmation by the court);
• Administration, including appointments made by filing prescribed documents with the court;
• Voluntary Arrangements under insolvency legislation; and
• Bankruptcy or sequestration

The ‘voluntary arrangements’ listed above include company voluntary arrangements and individual voluntary arrangements. Receiverships, members' voluntary liquidations, restructuring plans under Part 26A of the Companies Act 2006 and schemes of arrangement under Part 26 of the Companies Act 2006 are not Relevant Insolvency Proceedings.

The maximum amount a business can borrow depends whether or not they fall within the scope of the Northern Ireland Protocol.

The maximum facility value per borrower (if the borrower is part of a group the limits apply per borrower group) is:

• £2 million for businesses across all sectors outside the scope of the Northern Ireland Protocol; or
• For businesses in scope of the Northern Ireland Protocol:
  • £110,000 for businesses in the agriculture sector;
  • £170,000 for businesses in the aquaculture and fisheries sector;
  • £570,000 for businesses in the road haulage sector; and
  • £1 million for businesses in all other sectors.

Accessing a facility through RLS counts as a subsidy. If the business has received any previous subsidy, this may reduce the maximum amount they can borrow.

Loans are available for up to a six-year commitment term.

An RLS loan can be used for any legitimate business purpose including, but not limited to, managing cash flow, or for investment and growth purposes.

Our interest rates and fees vary depending on the specific lending proposal, but we are participating in the Scheme so we can pass on the economic benefit of the guarantee to borrowers (after taking costs into account including the Scheme lender fee). Under the Scheme, all upfront costs are capped 5% of the total loan amount. This is inclusive of valuation fees, legal fees and the arrangement fee.

Please speak to your BDM who can give you more information around fees and interest rates for RLS loans.

Yes, personal guarantees can be taken under the scheme but Principal Private Residence (PPR) are excluded.

Yes. Businesses with CBILS, CLBILS and BBLS facilities can access RLS, providing they meet the eligibility criteria for RLS and any additional lending is considered affordable by Atom bank.

If the business accessed CBILS, CLBILS, BBLS and/or RLS before 30th June 2022, they are still eligible for a RLS loan dependent on meeting the eligibility criteria. If the business took out a BBLS loan, it may count towards the allowance when determining the maximum amount a business can borrow. If your customer has received any aid through previous BBLS loans, they will have been informed by the lender at the time.

Yes, subject to meeting the Scheme eligibility requirements and providing they do not borrow more than the maximum amount they are entitled to. The maximum amount a business can borrow across different facilities and schemes will depend on a lender’s assessment of affordability and Scheme requirements.

Yes, where total financing needs (including any increase) are greater than the minimum facility sizes available under RLS.

Any refinancing will be considered as a new application for RLS, so will be subject to meeting the Scheme eligibility criteria. Refinancing can be sought with their existing lender or a different accredited lender.

Existing BBLS borrowers are able to refinance under RLS, however, borrower protections and eligibility/ terms under these schemes differ.

In certain circumstances, businesses can use an RLS facility to refinance existing debt where total financing needs (including any increase) are greater than the minimum facility sizes available under the Scheme.

For example, where a business is seeking to put itself on a more stable financial footing and/ or improve its working capital position, then, in principle, a RLS facility could be used, providing the business fulfils the Scheme eligibility criteria. Refinancing can be undertaken with or without an increase in the original borrowing.

Our Business Banking Lending Criteria allows for applications from Limited Companies, PLCs, Limited Liability Partnerships (LLPs), Partnerships and Sole Traders, all domiciled in the UK.

• Within the wider Scheme, provided that they satisfy the other eligibility criteria, RLS is open to:
• Sole traders;
• Corporations;
• Limited partnerships;
• Limited liability partnerships;
• Co-operatives and community benefit societies; and
• Any other legal entity carrying out business activity in the UK with business activity operating through a business account.

The business must generate more than 50% of its turnover from trading activity in the UK (i.e. the sale of goods or services), unless they are a registered charity or further education establishment. This includes income from investment/rental properties.

No. The following businesses are not eligible to apply:

• Banks, Building Societies, Insurers and Reinsurers (excluding Insurance Brokers);
• Public Sector bodies;
• State funded primary and secondary schools.

Yes. Companies that have received funding through EIS are eligible, provided that they satisfy the other Scheme eligibility criteria.

The maximum amount that can be borrowed under RLS is at a business group level. A business group means all enterprises having at least one of the following relationships with each other:

• one enterprise has a majority of the shareholders’ or members’ voting rights in another enterprise
• one enterprise has the right to appoint or remove a majority of the members of the administrative, management or supervisory body of another enterprise
• one enterprise has the right to exercise a dominant influence over another enterprise pursuant to a contract entered into with that enterprise or to a provision in its memorandum or articles of association
• one enterprise that is a shareholder in or member of another enterprise controls alone, pursuant to an agreement with other shareholders in or members of that enterprise, a majority of shareholders’ or members’ voting rights in that enterprise, or
• an enterprise is otherwise able, directly or indirectly, to control or materially to influence the policy of another enterprise as regards carrying on an economic activity that entails offering goods or services on a market, even if the enterprise does not have a controlling interest in that enterprise.

An ‘enterprise’ refers to any entity or person engaged in an economic activity, whatever its legal form. This includes private equity / venture capital shareholdings.

Like many Government-backed business support activities, facilities provided under RLS are a subsidy as the scheme constitutes financial help that gives an advantage to a business.

For borrowers outside the scope of the Northern Ireland Protocol, facilities provided under RLS are considered a subsidy under the UK/EU Trade and Co-operation Agreement (TCA) as incorporated into UK law by the European Union (Future Relationships) Act 2020 and constitutes small amounts of financial Assistance under the Act. After the UK’s Subsidy Control Act comes into force, RLS will constitute Minimal Financial Assistance under that Act.

For borrowers in scope of the Northern Ireland Protocol, RLS counts as de minimis aid under the EU de minimis regulations.

For borrowers outside the scope of the Northern Ireland Protocol, the maximum value of subsidy they are eligible for is £315,000 in aggregate over this and the previous two fiscal years (ending 31st March).

For borrowers inside the scope of the Northern Ireland Protocol, the maximum aggregate value of subsidy they are entitled to over this and the previous two financial years of the borrower is:

• €20,000 or £17,000 if the business relates to the primary production of agricultural products
• €30,000 or £25,500 if the business relates to fisheries and aquaculture
• €100,000 or £85,000 if the business relates to road haulage, or
• €200,000 or £170,000 for all other sectors.

The borrower will be required to provide written confirmation that receipt of an RLS facility will not mean the business will breach any of the above thresholds.

If the business has received other relevant subsidy, they should have been provided a written record of the amount provided.

No. The lender will be responsible for informing the borrower of the amount of subsidy they will be receiving. This will be dependent on whether they are inside or outside the scope of the Northern Ireland Protocol, the size of the facility, and the term length of the facility. The maximum a business can potentially borrow will be impacted by any relevant previous subsidy they may have received over this and the previous two fiscal years (ending 31st March).

As an example, if the business:

• is outside the scope of the Northern Ireland Protocol,
• has not received any other relevant subsidy over this this and the previous two fiscal years (ending 31st March), and
• receives a facility of £2 million over six years,

then the total amount of the subsidy will equal £315,000.

Or, if the business:

• is inside the scope of the Northern Ireland Protocol,
• is not in agriculture, aquaculture / fisheries, or road haulage sector,
• has not received any other relevant subsidy over this this and the previous two fiscal years (ending 31st March), and
• the business receives a facility of £1 million over six years

then the total amount of the subsidy will equal £170,000 or €200,000.

As part of the application, businesses will need to complete three questions, which will assess whether or not a borrower is potentially in scope of the Northern Ireland Protocol:

• Is the business established or registered in Northern Ireland?
• Does the business have any active subsidiaries, an active parent company, a business in the same corporate group and/or operations in Northern Ireland? Or does your business have plans to operate any such entities, or establish other operations in Northern Ireland within the next three years?
• Does the business provide a service or is it part of a supply chain which is specifically tailored to the needs of a customer or customers in Northern Ireland that manufacture or sell goods or participate in the NI wholesale electricity market?

If a business answers no to all three questions, they are not considered to be in scope of the NI Protocol.

If they answer yes to any of the three questions, they will then be required to answer the additional question sets which allow us to determine whether or not they fall within scope of the Protocol and the maximum borrowing amount that will be available.

Applicants will be subject to our standard credit and fraud checks.

Yes, we must consider a business to be viable. In assessing a borrowing proposal, we may disregard any concerns over short to medium term business performance due to the uncertainty and impact of COVID-19. However, we are not required to overlook these concerns and all final lending decisions are fully devolved to us.

Interest payments and capital repayments will typically start a month after taking out a facility and be monthly or quarterly thereafter. Unlike BBLS and CBILS, the government does not provide a 12-month ‘Business Interruption Payment’ for RLS.

RLS aims to help businesses who can afford to borrow, to access the finance they need, including for managing cash flow, investment and growth. Key differences include: