Update: Since this article was first published, the British Business Bank have submitted the following comment:
“The Recovery Loan Scheme supports borrowing of up to £10m for individual businesses and up to £30m across a group, and, once received, the funds can be used for any legitimate business purpose, including managing cash flow, growth and investment. It is designed to appeal to businesses that can afford to take out additional finance for these purposes. A key aim of the Recovery Loan Scheme is to improve the terms on offer to borrowers, but if a lender can offer a borrower the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.”
A number of problems have been exposed with the government’s Covid Recovery Loan Scheme.
The Times reports that lenders are warning of weak demand for the scheme post-pandemic from small businesses. There are also issues with firms that want to access the state-backed funding.
One banker told the newspaper that the previous Covid-19 emergency funding, totalling around £74bn, had been “too generous”.
The RLS is intended to bridge the gap between the emergency Covid-19 financial support and more normal credit conditions, such as affordability checks. RLS provides credit up to £10m and comes with an 80 per cent government guarantee for lenders – less generous than the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan scheme (BBLS).
However, there is evidence pointing to other issues with the scheme, namely too few accredited lenders and a high number of application rejections. There are 59 providers who are accredited by the British Business Bank, but your options depend on where in the UK you’re based and what type of finance you require.
Mr Bounce Back, a website discussing Bounce Back Loans, Recovery Loans and the Recovery Loan Scheme, has had “message after message” from firms who have made applications that were denied.
The author behind the web posts told Small Business that some who had applied to the bigger banks were being declined because their company’s turnover value wasn’t high enough, despite the scheme supposedly being open to businesses of all sizes.
“Many others” were turned down because of their credit rating or because they have a Bounce Back Loan. Others still were approved at the credit rating stage but, after submitting various pieces of documentation, were rejected, he said.
What’s more, those who were declined by bigger banks were asked if they were happy for their details to be given to a government accredited/approved loan portal. If they did, they were “bombarded with high interest lenders”.
Mr Bounce Back asked the All Party Parliamentary Group on Fair Business Banking how businesses can be removed from such lists weeks ago but hasn’t received a follow-up response since being told the issue was being investigated.
The British Business Bank have previously said it was planning to publish Recovery Loan Scheme take-up statistics this autumn.
Have you applied for the Recovery Loan Scheme? What has your experience been like? Tell us in the comments below