Grant / Funding Route
Recovery Loan Scheme finance for SME office solar
Recovery Loan Scheme (RLS): Up to £2m, 70% government guaranteed. Eligible for uk smes (turnover <£45m).
At a glance
- Funding type
- Recovery Loan Scheme (RLS)
- Value
- Up to £2m, 70% government guaranteed
- Eligibility
- UK SMEs (turnover <£45m)
The Recovery Loan Scheme is administered by the British Business Bank and provides UK SMEs with access to government-guaranteed commercial loans of up to £2m. Originally launched during COVID-19, RLS has been extended multiple times and now functions as a permanent SME finance route.
The government provides a 70% guarantee to the lender, meaning commercial banks and asset finance providers can offer financing to SMEs that might otherwise fall outside their normal lending criteria. For SMEs with strong cash flow but limited security, RLS can unlock financing where pure commercial routes would decline.
For office solar capex, RLS is particularly useful for SMEs in the £100k-£2m system size range. Term lengths up to 6 years for asset finance, longer for property-secured term loans. Rates vary by lender but typically run 2-3 percentage points above commercial bank base rates.
Eligibility requirements:
We work with the major UK SME lenders who participate in RLS (HSBC, Lloyds, NatWest, Investec, Aldermore, Shawbrook) and structure asset finance proposals that use RLS where it materially improves the customer's terms.
RLS vs standard asset finance: when does RLS add value?
Most UK SMEs with clean credit history and profitable trading can access standard asset finance for solar PV without needing the RLS guarantee. Asset finance lenders like Aldermore, Shawbrook, and Paragon actively lend on solar PV as a clean asset class with strong residual value characteristics.
RLS adds value in specific scenarios:
- Limited trading history: Businesses with fewer than three years of full accounts may find standard lenders decline or require personal guarantees. RLS's 70% government guarantee materially reduces the lender's risk, making approval more likely and terms better.
- Recent covenant breach or restructuring: SMEs that have recently restructured, exited an IVA, or breached financial covenants find standard lending difficult. RLS is specifically designed for viable businesses with temporary adverse credit events.
- Sector-specific risk: Some commercial sectors (hospitality, retail, media production) carry higher lender perception of sector risk. RLS guarantees can unlock lending that would otherwise attract a significant risk premium.
- Higher leverage: Where the solar project capex represents a high proportion of the business's asset base, RLS allows lenders to maintain comfortable loan-to-value ratios.
For the majority of profitable, established SME office occupiers, standard asset finance at 5.5-7% fixed (2026 market rate) provides equivalent terms to RLS without the additional administration. We will advise whether RLS adds value based on the customer's specific financial position.
RLS interest rates and terms for solar PV in 2026
RLS facilities for solar PV are typically structured as asset finance (chattel mortgage or hire purchase) on the plant and machinery elements, secured on the solar asset itself. Key terms in 2026:
- Rates: 5.5-8% fixed, depending on lender, term, and covenant strength. RLS facilities typically price 0.5-1% below comparable non-RLS facilities from the same lender.
- Term: Up to 6 years for standard asset finance. Up to 10 years where project economics support longer amortisation (typically larger systems).
- Loan-to-value: Up to 100% of asset value (solar systems have established secondary market value that lenders accept). Personal guarantees not required under RLS for companies with net assets above £100k.
- Arrangement fee: Typically 0.5-1% of facility value, rolled into the loan balance.
Combining RLS with AIA and other reliefs
RLS is a finance route, not a grant — it does not displace AIA, Full Expensing, SEG, or any other tax or funding relief. An SME can simultaneously use RLS for 100% of financing, claim AIA on 100% of capex, register for SEG on exported generation, and apply for WCS on EV chargers — all without any double-counting issue.
The combined effect: RLS finances the upfront capex, AIA returns 25% of capex as year-one tax relief (effectively repaying the first year of RLS repayments), and the monthly energy bill saving funds all subsequent repayments. Well-structured, the net cash position for a profitable SME is cash-flow positive from month one.
SME office solar: RLS worked example
An SME professional services firm (£8m turnover, profitable, 5 years trading) with a 120 kWp system priced at £108,000:
- RLS asset finance: £108,000 over 5 years at 6.5% = £2,115/month
- Monthly energy bill reduction: £2,280/month (at current tariff)
- AIA year-one relief: £27,000 = 12.7 months of repayments, received via corporation tax reduction in year one
- SEG income: £3,200/year = £267/month additional
- Net cash position from month one: +£165/month before AIA benefit
- Post-AIA effective payback: 3.6 years