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April 7 2021

Alternative lenders expected to play large role in recovery loan scheme

Michael Lloyd Industry News, News, Top 3 Ravi Anand, recovery loan scheme, ThinCats

ThinCats’ managing director Ravi Anand has predicted that alternative lenders will step up to participate in the recovery loan scheme (RLS) while traditional lenders are busy with bad debts.

The recovery loan scheme, which was announced by Chancellor Rishi Sunak in his March 2021 Budget, opened for applications yesterday.

The new programme is scheduled to run until 31 December 2021, subject to review and replaces the coronavirus business interruption loan scheme (CBILS), bounce back loan scheme (BBLS) and coronavirus large business interruption loan scheme (CLBILS) which all ended on 31 March.

Read more: Funding Circle and Assetz Capital expect to join Recovery Loan Scheme

The maximum amount provided under the scheme is £10m per business and £30m per group. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.

Anand, managing director of ThinCats, which was previously taking part in CBILS and hence has been one of the lenders invited by the British Business Bank to apply for accreditation to the RLS, said alternative lenders will play a big role in the new scheme.

Read more: Platforms mixed on Covid loan schemes’ success

“We’re seeing quite a lot of companies, especially tech and service businesses, who are doing well, growing rapidly and seeking borrowing,” she said.

“RLS ensures lenders will have a greater appetite for this lending at lower interest rates. Many viable businesses are preparing for a strong bounce in broad demand for goods and services but need capital to invest or rebuild their working capital. The RLS provides crucial support to encourage lending to these businesses with sectors like leisure more likely to receive capital.

“Unlike CBILS or CLBILS, RLS is more flexible and supports wider lending activity such as acquisitions and growth. Merger and acquisition has understandably been quieter over the past 12 months, but there is pent up demand and the RLS supports much-needed corporate activity which drives economic growth.

“I’d be interested to see the appetite among the banks. RLS loans require a full credit analysis and frankly, the banks will soon have to be thinking about recoveries once businesses have to begin repaying the interest on BBLS and CBILS. As a result it is likely we will see alternative lenders filling the void and private equity being very active.

“On the negative side, a number of small- and medium-sized enterprises which survived only because of support schemes are unfortunately likely to fail and we will see a ‘catch up spike’ in insolvencies during 2022.”

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