Back at the start of March, Chancellor Rishi Sunak announced the long-term replacement of the Bounce Back and Coronavirus Business Interruption Loan Schemes – the Recovery Loan Scheme (RLS).
The announcement sparked hope in many businesses who didn’t qualify for the original schemes or maxed out their allowance and still had a need for more funding.
The RLS was launched at the start of April but initial take-up was slow, with the Financial Times reporting that applications in the first week were in the low thousands. One of the largest UK banks received fewer than 500 applications in the first two days compared to 2,000 approved applications in the same period when the Bounce Back Loan Scheme opened the year before.
Slow take-up has been blamed on stringent checks and higher interest rates. Our hope is that when more alternative lenders launch their RLS products it will open up the scheme to businesses in need.
So why are the alternatives late to the party? The reality is they are still serving last orders of CBILS. Although the deadline for applications was the end of March, lenders had another two months to process applications and a further month to pay out approved loans. Once the last CBILS loans are served there may be a short hangover but after that the alternative lenders will be eager to get loans out there and an 80% government guarantee will add a huge amount of security in an uncertain time.
It is worth remembering that there were teething problems with CBILS loans when they were launched but once processes and terms were understood it became a useful lifeline for many. Our hope is that RLS will prove to be a slow burn rather than a damp squib!