What makes the Recovery Loan Scheme 3.0 different? – Atom

Commercial finance brokers may be familiar with previous iterations of RLS, which replaced the previous coronavirus loan schemes and has supported more than 19,000 businesses since its launch in 2021. The latest iteration however, which is expected to run until at least June 2024, aims to continue support for investment and growth in the face of challenging economic headwinds and continued cost pressure.

At Atom we were accredited by the British Business Bank for the new scheme in August, formally launching our offering in September. There is however broad misapprehension in the market as to how the scheme differs from previous incarnations, and we have continued to receive a number of queries from brokers in relation to some critical changes in eligibility criteria.

To make things a bit clearer, I wanted to share the five most common misconceptions we’ve seen around RLS and arm brokers with a more detailed understanding as to how the scheme can be leveraged to help their customers.

1. RLS is only for businesses adversely impacted by Covid-19

While this was true of the first RLS scheme, this is no longer the case. The new iteration of RLS is designed to back businesses facing increased pressures on company finances – no adverse impact from Covid-19 needs to be proven in an application.

2. RLS is only available for unsecured lending

Secured loans are definitely available through RLS and they’re actually the only RLS products that we offer currently at Atom. Other facilities are available elsewhere from other providers, including overdrafts, asset finance, and invoice finance. These can be used for any legitimate business purpose including managing cashflow, investment and growth.

3. RLS cannot be used for property investment or sole traders

As long as 50 per cent of the turnover comes from trading activity (of which property investment can be eligible), the new RLS is available for trading businesses and property investment, and can be for both refinance and purchase purposes.

Sole traders, partnerships and unincorporated businesses are all eligible for RLS, as long as they fit other scheme eligibility criteria and meet the providers lending criteria.

4. Businesses are not eligible for RLS if they already have a loan from another government-backed scheme

Any existing loans with other schemes e.g. CBILS, CLBILS, BBLS and/or RLS facilities before the 30 June 2022 do not determine eligibility. A business could still qualify for the maximum amount available under the new RLS, and keep its existing facilities, if it can afford to make the payments across all of them.

There are some instances where a Bounce Back Loan (BBL) may limit the maximum loan amount available and a lender may request it to be repaid before they offer an RLS loan under the new scheme.

There are some maximum values of subsidy that a business is entitled to that can impact eligibility, so it’s important to be aware of this when applying too.

5. Trading businesses must have been trading since 2018 and need to demonstrate they could have serviced the debt in 2019

This is not the case. The new version of RLS is open to SMEs who can afford to take on new debt — performance and viability pre-Covid 19 is not a requirement.

Lenders will need evidence, however, that demonstrates the business can afford to service the debt.

Coronavirus is still causing distinct challenges across many industries, in conjunction with the broader inflationary environment. It’s little surprise that a lot of business owners are still looking for some support to assist with getting back on their feet.

As a broker, knowing how the new scheme works and who could benefit will play an important role in giving UK businesses access to much needed finance as they look to grow and prosper during an uncertain economic period.