The Recovery Loan Scheme - Why Has it Failed to Take Off?

Last post: Oct 29, 2021

Earlier this week the British Business Bank published data for the first time on the uptake of the Recovery Loan Scheme (RLS), showing that just £1.06bn worth of loans had been extended so far - a sharp contrast to CBILS and BBLS at the beginning of the pandemic which helped facilitate over £80bn in small business lending throughout 2020 and early 2021.

Choice Business Loans considered the reasons for this significant disparity, identifying a "just in case" behaviour towards these loans earlier on in the pandemic.

Choice Business Loans Director Sharon Cook said: "At the beginning of the pandemic we were plunged into uncharted waters - there was huge uncertainty. Businesses were keen to take the first Government-backed loans CBILS and BBLS whether they needed them at the time or not, and have kept the money as a safety net.

"With that, they are now leveraged to their maximum and cannot take further loans."

Choice Business Loans CEO Sean O'Farrell points the finger at a lack of political will.

O'Farrell said: "There isn't the same political will to lend that there was a year ago, when there was significant pressure from the Government to get liquidity back into the market, and lenders were onboarded to the new loan schemes as fast as possible.

"The efforts with RLS now feel a little token."

Beyond this Cook argues that the RLS has a significant flaw.

She said: "It's a Recovery Loan Scheme - the clue should be in the name. Yet businesses who need it for recovery, whose turnover severely dipped during the worst of the pandemic, cannot get it.

"It's not quite what it says on the tin, and our clients are really frustrated with that. It's a well-intentioned scheme, but it is not getting to the people who need it most."

Both Cook and O'Farrell stress their sympathy for the lenders however, acknowledging this is a difficult situation to manage; lenders still have to lend responsibly.

Cook said: "Lenders will rightly be mindful of making sure businesses can give them confidence the loans will be paid back in due course - it will be the taxpayers who will be left holding the bills if not!"

If you would like advice on RLS and the best finance solution for your business, pick up the phone to us now: 01494 410 125.