What does the end of the Recovery Loan Scheme mean for small businesses?

The Government supported Recovery Loan Scheme (RLS) ends on 30th June 2024.

It will be replaced by the Growth Guarantee Scheme (GGS) for two more years, however there is expected to be a delay in lenders being accredited in the new scheme. This means that small businesses may not have as much choice over the next few months.

What is the Recovery Loan Scheme and its successor the Growth Guarantee Scheme?

There have been 3 versions of RLS which replaced the CBILS facilities offered over the pandemic. The Government has gradually been reducing the amount of guarantee offered so that now it provides:

• A 70% government-backed guarantee to the lender

• Maximum of £2m facilities

• Capped interest rates and arrangement fees

• Personal guarantee still likely to be required

If a lender is able to offer one of their normal commercial business loan facilities, they must do so and these are likely to be at lower rates. However, the benefit of the RLS (and the GGS in due course) is that lenders are able to offer facilities to those riskier propositions which would not usually meet their lending criteria. 

Business credit scores play a key role here. Lenders use credit scores to assess the level of risk involved in extending finance. A stronger credit score can increase the chances of approval and lead to better terms, while a lower score might make schemes like the RLS or GGS particularly valuable.

At Capitalise, we continue to see businesses benefit from this scheme—especially those that may fall just outside standard lending thresholds.

The transition from the Recovery Loan Scheme to the Growth Guarantee Scheme

Today, most major high street, challenger banks and fintechs offer the RLS. Funding Circle has provided almost 35% of all facilities up to 31/3/24 (latest data). 

When the RLS ends on 30th June 2024, lenders who wish to continue on GGS will need to become accredited again by the British Business Bank and this is likely to take some time. 

For example, Funding Circle said on 13/5/24 “As RLS comes to an end, we’ll continue to provide our Funding Circle loans, and our ambition is to make loans available under the Growth Guarantee Scheme as soon as we’re able to.”  To give some idea, the RLS launched on 1/4/21 and Funding Circle didn’t receive their accreditation until 27/5/21, a gap of almost two months.  Until then, businesses were restricted to only applying for RLS to the largest banks which received accreditation sooner.  These were likely to have stricter lending criteria and therefore companies had less choice. 

Which businesses may need funding before the Recovery Loan Scheme ends?

For those businesses who may need funding over the summer months, the funding team at Capitalise suggest you apply immediately, so that your client doesn’t miss the 30/06/24 deadline. 

This may include those businesses who:

1. Are experiencing rapid growth or have a great opportunity to expand

2. Seasonal businesses who have increased demand for working capital over the summer (eg tourism, hospitality, leisure - especially with major sporting events such as the Euros and Olympics likely to be driving trade)

3. Companies which have shutdowns or experience lower trading volumes over part of the summer months (eg manufacturing, engineering or educational businesses)

How can Capitalise help?

f you're an accountant, get in touch with your Partnership Manager or contact us to access Capitalise’s platform and support. Whether your client needs a complete view of their cash flow, business credit profile, debtor book risk, or funding eligibility, we connect them with over 100 lenders to ensure they have access to the best financing options available.

If you're a business owner, you can apply for business loans, credit cards, and other finance options with Capitalise. Plus, when you sign up, you can check your business credit score and monitor the scores of companies you work with, helping you stay on top of your financial health and improve your chances of securing funding in the future.