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Recovery Loan Scheme: myths, misunderstandings, and more

5th Jul 2023
Brought to you by
Allica Bank logo
Allica Bank is Britain’s award-winning business bank focused exclusively on supporting established...
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This article is part two of a four-part series from Allica Bank’s Government Lending Scheme Manager David Holdstock about the Recovery Loan Scheme. You can read part one here: An expert’s guide to the Recovery Loan Scheme.

Recovery Loan Scheme: myths, misunderstandings, and more
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The Recovery Loan Scheme (RLS) is a government-guaranteed facility, designed to increase access to funding for trading UK businesses. It enables accredited lenders to lend beyond their existing credit appetites, meaning businesses that may not have been able to access funding before could now have the opportunity to do so.

It’s a fantastic initiative, especially at a time when many businesses are struggling to grow or find finance. However, in my experience, few business owners or accountants properly understand it, so it often doesn’t get the consideration it deserves. The result is that many businesses are likely to have missed out on the opportunity to find finance when they sorely needed it.

That’s why, here, I wanted to dispel some misconceptions about the scheme and hopefully help you help your clients find finance, even when they thought they may not be eligible.

1) The Recovery Loan Scheme is only for businesses in recovery

Incorrect! In fact, quite the opposite. Despite the name, the latest iteration of the scheme removed any mention of recovery from its eligibility criteria. Instead, the British Business Bank is now gearing the scheme around helping businesses invest and grow, rather than just recover.

To be eligible, your client must be a trading business based in the UK and have a group turnover below £45 million (it’s important to say that if they meet this criteria there’s still no guarantee they’ll be approved).

At Allica, we’ve supported a range of healthy businesses with finance to do everything from purchasing their premises or acquiring a business, to buying solar panels or plant and machinery, to refinancing existing debt onto more favourable terms.

2) It’s too complicated and time-consuming to apply

Again, this isn’t true. The RLS is applied for by the lender themselves, meaning they have to handle most of the extra admin. In Allica’s case, for example, there are a couple of extra forms that customers will need to fill in, but it’s nothing too burdensome.

3) My client already has another government-backed, covid-related support facility

That doesn’t matter. Eligibility for the Recovery Loan Scheme is not affected by whether your client previously took out a CBILs or BBLS loan.

In fact, your client could even explore using the Recovery Loan Scheme to refinance their CBILS or BBLS loans and potentially get more favourable terms.

4) My client can only get an RLS loan from their existing bank

On the contrary, many accredited lenders will be willing to look at applications for loans that will have RLS support from businesses that they have no prior relationship with. Allica Bank included!

5) The Recovery Loan Scheme is no longer available

Not so. There’s still plenty of time for your clients to benefit from the Recovery Loan Scheme. Remember, it’s no longer tied to the covid pandemic, so the fact the pandemic may seem long gone doesn’t mean the RLS has followed suit.

The current iteration of the Recovery Loan Scheme is due to run until the end of June 2024.

Myths busted, now what?

As an adviser and partner to business owners, accountants are in a trusted position to help their clients find finance. The Recovery Loan Scheme could be the difference between them finding a lender and not, so having it in your arsenal of options could be a fantastic way to add real value to your clients.

Whether it’s to restructure existing debt, purchase premises, release capital from an existing asset, or buy equipment or vehicles, the Recovery Loan Scheme may be your client’s best option to find the right finance for them.

You can find out more information about the Recovery Loan Scheme on the British Business Bank website here. Or feel free to reach out to your local Allica Bank relationship manager about how your client might be able to benefit from the Recovery Loan Scheme.

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