Copy article

Who is the Recovery Loan Scheme right for?

Journalist: Jake Carter, Mortgage Introducer

ended 26. July 2023

While a vast majority, or almost 90%, of asset finance brokers, know that the government-backed Recovery Loan Scheme (RLS) is still available for banks to use, less than half, or 49%, have recommended RLS-backed loans to clients within the last six months, Allica Bank has said.

Who are RLS-backed loans right for?

Why do you believe brokers have not recommended this scheme to clients? What could be done to improve brokers’ education about this scheme?

Is the lack of awareness of this scheme an industry-wide problem with education? What more can be done?

2 responses from the Newspage community

Copy all

Copy

Marcus Wright
Managing Director at Bolton Business Finance
The latest iteration of the Recovery Loan Scheme (RLS) has seen the main benefits to SME's removed and we have seen significantly reduced demand. Many businesses liked that directors did not need to give personal guarantees on previous versions of RLS, however since August 2022 this has been removed. As well as this, there are also significantly less accredited lenders and available RLS backed products on the market. Most of the benefits now are to the lender with a 70% government-backed guarantee against the outstanding balance of the facility (after its normal recovery process).
Copy

Mark Grant
Business Finance Adviser at The Business Finance Branch
RLS 3.0 is the latest iteration of government backed loans and replaces CBILS and the earlier Recovery Loan Schemes. It doesn't need a business to prove covid impact but doesn't offer the same borrower benefits as earlier schemes. A personal guarantee might be requested and there is no automatic interest-only period for example. The benefits to the lender, with a 70% government guarantee of unrecoverable debt, do not translate to any easier underwriting or lower rates for the borrower. We can often source better terms for the client away from the scheme than on it. In business loans, some lenders can indicate rates 25%-50% higher on the RLS than standard loans. Higher rates for those that need it more? We understand the scheme - but it is not always the best outcome for the client - and that is what we are looking for.