Lenders are reportedly seeing less demand for the recovery loan scheme (RLS) than previous Covid state-backed schemes.
According to The Times, one senior banker said that his lender is receiving an “extremely low” number of applications as interest fell following an initial stampede of applications, and indications from other rival lenders have conveyed a similar pattern.
The RLS, which was launched in April, offers loans up to £10m with an 80 per cent government guarantee for lenders and is set to end on 31 December, subject to a review.
It replaced the coronavirus business interruption loan scheme, bounce back loan scheme and coronavirus large business interruption loan scheme and is expected to reach a fraction of the £79.3bn loan volumes seen from the previous schemes, according to The Times report.
However, part of the problem could be the delay in accrediting lenders to the scheme.
Chirag Shah, chief executive of Nucleus Commercial Finance, told The Times that many borrowers who wanted to access the scheme were having to wait for more lenders to be accredited.
Mr Bounce Back, a website that tracks small companies’ use of emergency credit, received many applications from customers who had been awaiting a decision or were rejected for the scheme.
“The RLS supports borrowing of up to £10m for individual businesses and up to £30m across a group, and, once received, the funds can be used for any legitimate business purpose, including managing cashflow, growth and investment,” said a spokesperson from the British Business Bank.
“It is designed to appeal to businesses that can afford to take out additional finance for these purposes.
“A key aim of the RLS is to improve the terms on offer to borrowers, but if a lender can offer a borrower the choice of a commercial loan on better terms, without requiring the guarantee provided by the RLS, they should do so.”
The British Business Bank has accredited more lenders to the scheme recently, including: Simply Asset Finance, FW Capital, Mercia Asset Management, Shawbrook Bank, Newable, SWIG Finance, Whiterock Finance, Allied Irish Bank (GB) The FSE Group and Maven Capital Partners.