are there alternatives to bounce back loan scheme?
As businesses across the UK prepare for the long-awaited opportunity to reopen after lockdown, many are now looking to get the funding they need to help them move on from the pandemic.
As announced in the Budget last month, Chancellor Rishi Sunak has now opened the Treasury’s Recovery Loan Scheme (RLS) to help businesses stay afloat during the pandemic. With the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) now closed for new applications and top-up applications, the RLS will step in to continue to aid UK economic recovery throughout 2021.
what is the recovery loan scheme?
The new scheme, which runs until December 31, has the same Government guarantee as the CBILS and CLBILS, but is less generous than the 100% guarantee for the BBLS. The treasury has promised to cover 80% of what banks lend if businesses do not pay back their loans. This may mean that lenders will be likely more cautious on approving borrowers, even for smaller loan amounts.
Businesses will be able to access loans from £25,001, up to a maximum of £10 million and it will be administered by the British Business Bank, with loans only available through a “diverse network of accredited commercial lenders.”
Interest rates have been capped at 14.99 percent and fees and interest will be incurred from day one.
There is no turnover restriction for accessing the Recovery Loan Scheme, so businesses of any size can apply but to be eligible for a loan, a business must:
- Be trading in the UK
- Have been viable if not for the pandemic
- Have been adversely impacted by the pandemic
- Not be in collective insolvency proceedings
Access to the Recovery Loan Scheme will be dependent on stringent affordability checks and any existing use of CBILS/BBLS will be considered.
alternative options to the RLS
If you are looking for alternatives to the Recovery Loan Scheme, there are many specialist finance options available for businesses, especially if you require a bit more certainty and flexibility from a funder. What arrangement is best for your business will depend on your circumstances, but for those with short-term requirements- looking to quickly reboot their business without heavily damaging cash reserves until longer-term financing is put in place, a bridging loan could be the solution.
A bridging finance company is often able to make lending decisions within hours of initial enquiry so funds can be released quickly, sometimes even in less than a fortnight.
Whether funds are needed to purchase new premises, acquire stock, facilitate a new venture, or provide additional capital to stimulate growth, MT Finance can help fund your time-sensitive business venture.
For example, we were recently approached by a client who required funds to purchase a restaurant in Kensington, which he intended to make light refurbishments to before opening.
He was waiting on the sale of one of his overseas investment properties to fund the transaction, but the sale process was taking a little longer than expected. As the funds were only required until the investment property was sold, he needed a short-term fix to capitalise on the business opportunity.
In just over 3 weeks, we provided a £214,000 second charge bridging loan on the client’s main residence, at 65% LTV of the £440,000 open market value. Interest was retained at 0.89% over 6 months.
By opting for a bridging loan, the client was able to purchase the restaurant and start the refurbishments in line with his scheduled open date. Once his investment property is sold, he can repay our loan, and should he choose to do this early, he can do so without incurring any fees or penalties.
how MT Finance can help
Our bridging loan products are designed to meet the many diverse needs of business owners. We do not require evidence of trading history, accounts, or proof of income. This allows us to take a practical, common-sense approach to lending.
In addition, we accept many income sources- whether you are self-employed, in a partnership, or own a limited company, and we will accept residential, commercial, or semi-commercial property types as security.
- 1st & 2nd charge loans
- Loans from £50,000 – £10,000,000
- Up to 70% LTV of the OMV
- Terms from 1-24 months
- Residential, commercial & semi-commercial property
- No up-front fees, no exit fees, no early repayment charges
- No credit scoring
The past 12 months have been an especially challenging period for businesses. MT Finance is committed to continuing to support SMEs through the next phase of the pandemic.