Failings revealed in Covid Recovery Loan Scheme

Shortcomings have stifled uptake of the Covid Loan Recovery Scheme, such as a number of rejections for small business applicants

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).

>See also: Recovery Loan Scheme up to £10m will replace CBILS and 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       

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Small businesses struggling to get credit from Recovery Loan Scheme

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  1. We are a small independant Jewellers, a great business but we could have done with some support by the RLS but have been declined twice due to directors credit rating nothing to do with business performance which is increased year on year and we have lots of great plans for the future

  2. it’s really bad how the banks can turn you down but you are referred to a high interest bank to deal with and you then qualify some how if they can secure on your property

  3. I am MD of a sports and events company and was targeted by a number of providers as eligible. Submitted lots of documentation and turned down by Funding Circle, Portman Finance, amongst others, with neither party willing to advise why? CBILS loans applications were at 60% rejection from what I understand. Help for small businesses deemed as too risky and those companies received CBILS loans that needed them least.

  4. We had applied for the recovery loan scheme with NatWest in April (9th) and have not had a response, we have been promised 3 times that a decision will be made, but no such thing has happened. It’s very frustrating, as a rejection would at least be a result and closure. It has been nearly six months, numerous phone calls, 1 complaint and too many empty promises. I had no idea that a bank could hold the authority to operate on such a low level.

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