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Beyond Bounce Backs

Bounce Back Loans were a lifeline for many businesses this past year, so what's next and what should you expect from the new Recovery Loan Scheme?

Paul Surtees Apr 22, 2021

Capitalise, like most accountants, was not involved in the facilitation of Bounce Back Loans (BBLS). They were designed to be delivered without underwriting via the banking system at a flat 2.5% fee, with only KYC and AML requirements.

With 12 months free of capital and interest payments, there was very little need for advice or help with documentation.

If a business needed greater funds than the £50k BBL, they could take a CBIL but would need to pay down any BBL. As there would always be an increase in rate from the 2.5% BBL, inevitably (& wisely) few businesses made the transition.

As a CBIL was a commercially underwritten loan with applications requiring specific business and accounting information to be successful, accountants stepped up and supported clients. These same accountants will be vital through the Recovery Loan Scheme (RLS).

Bounce Backs and Recovery Loans together

Recovery Loans look and feel much like a CBIL (check out our datasheet for more). Aside from paying capital and interest from day one, the biggest change relative to Bounce Backs is that you can keep a BBL and take out a Recovery Loan alongside, with no need to refinance.

This is a powerful feature that was missing from CBILS. Of the 1.5 million SMEs with a BBL, many will need further financing as the economy opens and working capital is squeezed. Others would like to explore consolidating expensive overdrafts and credit cards. The RLS allows for both.

The maximum APR rate of a Recovery Loan will be 14.99%. If you assume a business requires a further £50k via a Recovery Loan and borrows at the maximum 14.99% rate, to top up their existing £50k BBL, then the weighted average APR for £100k loan will be 8.745% for £100,000 of borrowing, very close to the low end of high street overdraft range 5-35%, and much lower than credit card fees.

The opportunity to help smooth future cash flows for smaller businesses is now available to Capitalise and accountants alike.


How we can help 

To help you get to grips with the new scheme quickly, we've created an RLS starter park with eveything you need to introduce the scheme to clients. 

For capital solutions that sit outside of the RLS, we can help enhance your firm’s Capital Advisory offering, increasing client opportunities, bringing in commission payments and increasing your value as an adviser. Our Capital Advisory guide explores the types of capital available. 

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