Small Businesses Having Difficulty Obtaining Loans From The Recovery Loan Scheme
According to the Association of Small Businesses (FSB), small businesses are struggling to get credit through the renovation loan program launched earlier this month to replace emergency programs like bounce-back loans.
Banks blame stricter credit checks and higher interest rates for the sluggish acceptance.
Craig Beaumont, chief foreign affairs officer at the FSB, told the Sunday Times: “The government should do everything possible to get companies into the recovery during this“ unlock ”phase to prevent companies from reaching the final hurdle due to deficiencies fall in cash flow “.
> See also: How does the Recovery Loan Scheme compare to other Alt-Fi options?
According to the Financial Times, applications were “low thousands” for the first week, with fewer being re-accepted as potential borrowers. Many of these applicants were already users of government coronavirus loan programs, the newspaper reported.
According to the FT, one of the UK’s largest banks received fewer than 500 applications in the first two days after the program went live on April 7th. The same bank approved nearly 2,000 requests over the same period that the bounce-back program opened last year.
The application rules for the Recovery Loan Scheme are much stricter than the Bounce Back Loan Scheme (BBLS).
The BBLS offered government guarantees for loans of up to £ 50,000 on particularly generous terms with no interest rate for the first year and only with light credit checks. The government has guaranteed more than £ 46 billion in bounce back loans.
In contrast, the RLS has interest rates as high as 15 percent, extensive reviews of borrowers’ financial history and viability, and calls for personal guarantees that put the borrower at risk for losses.
Announced in the budget in March, the RLS offers 80 percent guarantees for borrowing of up to £ 10 million for individual companies.
Beaumont has asked the government and banks to review the first month of operation to see if the application process could be streamlined or the £ 25,000 minimum credit threshold could be lowered.
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More information on the renovation loan scheme
Recovery Loan Scheme 2021 Full Update – Where Do I Apply for My Loan?