What are your lending options after the RLS?

lending after rls

The Recovery Loan Scheme launched on 6th April 2021 and ran until 30th June 2022

The Recovery Loan Scheme supported SMEs by giving them access to finance they needed to grow and invest and reduce the impact of the COVID19 pandemic on their sales and profitability.

There were no restrictions on what the finance could be used for as long as it was used for legitimate business purposes, such as cash flow, marketing or investment to improve efficiency, and that you were a UK mainland, established trading business within the UK (for example, if you were using funds for trading outside the UK it would fall outside of the criteria).

Businesses were able to borrow up to £2 million per business or up to £1 million for businesses in scope of the Northern Ireland Protocol.

The actual amount and terms varied between business types, profiles and credit worthiness.

With 70% of the loan guaranteed by the government, the RLS aimed at providing support for businesses in need.

What are the differences?

The RLS (and other government back COVID related loans), benefited from lower interest rates (in most cases) and no personal guarantees were required up to a lend of £250,000.  Now that the scheme(s) have closed, pre-pandemic lending criteria and conditions are back.

This translates to the requirement for personal guarantees, which has been a shock to the market and borrowers who, on the whole have, become accustomed to low interest rates and no need of personal guarantees (PGs).  In addition, interest rates are now higher, in general terms, that under the covid related government backed schemes (BBLS, CBILS & RLS).

What you need to remember is that interest rates and lending conditions are more or less back to their pre-pandemic.

It will take time for borrowers to adjust to the perceived increase cost of borrowing and the requirement for PGs, however, in real terms there is not an increase in cost, just a lack of support by way of a government guarantee.  This therefore makes any loan facility more risky for the lender, hence the cost increases to compensate for this risk.

Borrowers must need to be realistic when assessing the cost of a loan or lending facility.  Any prospective lender will have their own rates and their considered lending policy, which will include “rate for risk”.

Interest rates will vary based on:

  • Your personal financial status (in some cases)
  • Your company’s financial status
  • What the funds are being used for
  • The type of business loan
  • The loan term

What loans are available?

For businesses looking to source external finance or to pay off their CBILS, bounce back or RLS loans, or to increase spending power, there are a range of options available.

Our most popular finance products since the RLS and other COVID related finance schemes have closed are unsecured business loans, asset finance, VAT and tax loans and invoice finance.

RLA Capital have seen an upward trend in unsecured loan applications as they do not use security and are available for any legitimate business use.

In addition, there have also been upward trends in VAT and tax loans as the HMRC VAT and tax payment schedules have returned to their usual pre-pandemic schedule.

The main types of business loans available are:

How to apply for business finance

How to apply for business finance will vary depending on where and who you apply with. Whether this is direct to a traditional lender, such as your bank, or an alternative lender via a broker, the process can vary.

When you apply you need to have a clear understanding of your requirements and whether your borrowing needs are realistic in relation to your credit status and company strength.

As the loans are no longer government backed, lenders have reinstated their pre-pandemic criteria as they are no longer offered government security on the loan.

Finding the right lender for your requirements can be difficult if you do not have a clear understanding of the market and lenders eligibility criteria.

When applying for business finance you need to carry out research into which lender is likely to accept your application. Or like many other business owners, use the services of a finance broker as they have the knowledge to best place your application.

Even with the variations in eligibility between lenders, all will look at the same key conditions.

  • You’re 18 years of age or older
  • You’re a current UK resident
  • You have been trading for more than 12 months unless applying for a start up facility
  • You are a UK registered business
  • You pass credit checks
  • You pass affordability checks
  • Your business is financially stable
  • What the funds will be used for
  • How the funds will benefit your business

Most lenders will have an appetite to lend to companies that:

  • Are profitable
  • Have been trading more than 12 months
  • Are financially stable
  • Pass affordability checks
  • Have a Bonafede need for funding in order for their business to grow

Whilst RLA Capital cannot offer financial advice, we can provide various business loans to assist with cash flow. RLA Capital would recommend speaking with your accountant if you are experiencing cash flow problems.

Updated: Feb 10, 2023