How does the Recovery Loan Scheme compare to other Alt-Fi options?

The Recovery Loan Scheme (RLS) was introduced on April 6, 2021. The program, which will replace CBILS, CLBILS and BBLS, is currently open until December 31, subject to review.

You can apply for funding through the RLS if your business is hit by the pandemic: it’s specifically designed to give business owners the ability to support their plans with additional funding if the nation enters a recovery period from the lockdown.

You can use your RLS loan for any legitimate business purpose. For example, you can use it to buy a necessary piece of equipment or hire a staff member to meet a growing demand, or to manage the cash flow when your space reopens.

While the RLS has its perks, it is certainly not the only funding option on the table.

In fact, the British Business Bank – the organization in charge of lender accreditation for the system – states that ‘a primary objective of the Recovery Loan Scheme is to improve the terms it is offered to you, but if a lender can give you a choice a commercial loan on better terms without the need for the guarantee provided by the RLS should they do so. “

How does the RLS compare to the previous scheme?

Although the RLS is essentially a follow-up to the CBILS, there are more differences than similarities between the two. For example, one of the main benefits of the CBILS was that the government covered the first year of interest on behalf of the borrower.

“… If a lender can offer you the option of a commercial loan on better terms without needing the guarantee provided by the RLS, they should do so.”

This is not the case with the RLS, but it has other pluses. The fact that the applicant does not need to have a minimum / maximum annual turnover makes it easier to access at first. Companies can also apply for funding up to £ 10m instead of £ 5m.

characteristics Coronavirus Business Interruption Loan Scheme (CBILS) Recovery Loan Scheme (RLS)
Loan amount £ 50,001- £ 5 million £ 25,001- £ 10 million
Loan term Up to 10 years Up to 6 years
The government pays interest on your behalf for the first 12 months Yes No
The government pays an upfront fee on your behalf Yes No
No personal guarantees are required for loans up to £ 250,000 Yes Yes
Minimal trading history 3 years No minimum
Minimum annual sales Over £ 200,000 No minimum

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How many types of loans are available under the program?

Four types of financing are available under the RLS: fixed-term loans, overdrafts, asset financing, and invoice financing facilities.

When it comes to asset finance and invoice finance facilities under the RLS, you can apply for a minimum of £ 1,000. Forward and bank overdrafts start at £ 25,0001. Term loans and asset finance facilities are available for up to six years, and overdrafts and bill finance facilities are available for up to three years.

Who offers the RLS?

The RLS is available through a variety of British Business Bank accredited UK lenders including high street banks and alternative corporate finance lenders. The RLS is open to you if you have borrowed one of the previous programs. However, the amount you previously borrowed may affect how much you can avail.

What other types of Alt-Fi funding are available?

Again, if the nation emerges from the lockdown, the RLS is by no means the only funding option businesses can take advantage of, and you may be eligible for a facility with more favorable terms.

When it comes to managing your cash flow or fund growth, here are some things you can consider:

1. Revolving Credit Facility

Revolving credit facilities allow you to access finance when you need it and only pay interest when it is used. It is a flexible type of financing that you can use as needed. They come in handy for times when you need a quick cash boost. As with business credit cards and overdrafts, you have a credit limit.

2. Asset Financing

Buying a new vehicle, machine or equipment directly can be too expensive for many SMEs. This is where asset financing comes in.

With Asset Finance, you can spread the acquisition costs over a longer period of time and even upgrade to a newer model at the end. If you decide to purchase an asset before March 2023, you can also take advantage of the super-deductible tax break.

3. Invoice financing

With invoice finance, you can borrow money based on your customers’ debts so you can get the money faster. After your clients / customers have been billed, you pass the information on to the financial services provider, who pays you an agreed percentage. Once the customer pays the bill, you will receive the rest of the money minus the lender’s fee.

4. E-Commerce Financing

Many e-commerce companies are currently in need of funding to grow. Fortunately, there are alternative lenders who have an appetite for lending to companies that need a working capital boost in the form of quick business loans and working capital finance. If you are importing goods from abroad and need finance, trade finance may also be an option.

5. Dealer prepayment

Non-essential businesses, gyms, pubs, and others will reopen on April 12th, and many will seek flexible funding when they’re back on track.

If you make store card payments either online or in person, you may be eligible for a merchant prepayment. With these advances, you receive an amount that you gradually repay through your customer’s card transactions.

6. Early repayment business loans

Short-term business loans are designed to make it easier for companies to access the finance they need until they can repay them or refinance their debts. One of the main benefits is the quick approval process, which makes it a convenient option for those who can’t afford to wait.

What’s next?

Financing options processed over £ 760m in CBILS loans in the past fiscal year. You can use their platform to apply for RLS funding as well as the many other alternative funding options out there today. The funding options team can help you find a solution that best suits your business needs.

Start exploring your business financing options today.

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Recovery Loan Scheme 2021 Full Update – Where Do I Apply for My Loan?

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