According to numerous sources, the Business Recovery Loan Scheme is off to a slow start. In this article, we’ll discuss what could be causing businesses trouble gaining access to funding from the Business Recovery Loan Scheme and how businesses can improve their chances of being accepted if they’ve been unsuccessful.
Businesses have lost their appetite for debt
The fact there was a surge in applications for the governments bounce back loan at the end of March could mean that businesses who needed financial support from the government, had already received what they needed and have no appetite for any more debt.
Fewer Lenders
Another factor that’s likely to be having an influence is there are less accredited lenders allowed to launch the RLS compared to other COVID-19 lending support from the government, like the bounce back loan. This could mean that funding is not as accessible as before.
Higher Interest rate
The interest rate of the Business Recovery Loan Scheme is also considerably higher than say the bounce back loan scheme, which could be a major factor in the lack of uptake. The Business Recovery Loan Scheme’s interest rate is capped at 14.99% but varies from bank to bank. For example:
NatWest’s interest is 6.16% for the first 3 years then 7.06% after, whereas HSBC’s interest rates are 4.49% for the first 3 years then 4.99% for loans over 3 years. Both are still higher than the 2.5% interest rate of the bounce back loan scheme.
Stricter checks
Along with higher interest rates, lenders are conducting stricter background checks on applicants. This includes credit checks on all the directors and the business itself, which can reduce the number of businesses that are accepted due to poor credit scores.
How businesses can give themselves the best chance of success when applying for loans
The first thing a business needs to do when applying for a loan is to understand more about the importance of a business credit score and how it affects applications to loans.
CreditFocus have a great breakdown of what can have a positive and negative effect on a business credit score and how it’s used by lenders and suppliers to determine who to do business with, click here to read more.
There’s also this article about how to improve your business credit score using business credit checks, which includes what a good and bad company credit check looks like and what actions to take to improve it and stay on top of your business credit score.
To get a 30-day free trial to CreditFocus and understand your business credit score, click here.