Recovery Loan Scheme 2022: 10 common myths busted

In August, a new version of the Recovery Loan Scheme (RLS) was introduced, complete with changes to bring it up to date for a post-pandemic world. This new Scheme will now run until June 2024.

Here at Atom bank, we were accredited by the British Business Bank before launching our offering last month. However, since then, we’ve received a few queries and noticed some misconceptions about what this version of RLS can offer businesses.

To make things a bit clearer, we thought that we’d take a closer look at some of the most common myths about the new Recovery Loan Scheme — then bust them open!

Myth: RLS is only available for unsecured lending

Truth: This isn’t true. Secured loans are definitely available through RLS. In fact, they’re the only RLS products that we offer here at Atom bank. Other facilities available elsewhere from other providers, including overdrafts, asset finance, and invoice finance.

Myth: Amortisation term can only be a maximum of six years

Truth: Untrue! A loan can have a six year commitment period and profile debt over up to a 25 year amortisation period.

Myth: RLS cannot be used for property investment

Truth: False. As long as 50% of the turnover comes from trading activity (of which property investment can be eligible), the new RLS is available for trading businesses and property investment, and can be for both refinance and purchase purposes.

Myth: RLS is only for businesses adversely impacted by COVID-19

Truth: Just not true! The new iteration of RLS is all about business growth and recovery, so no adverse impact from COVID-19 needs to be proven.

Myth: Trading businesses must have been trading since 2018 and need to demonstrate they could have serviced the debt in 2019

Truth: This is not the case. The new version of RLS is open to SMEs who can afford to take on new debt — performance and viability pre-COVID 19 is not a requirement.

Here at Atom bank, we need a minimum of two years' evidence of trading history that demonstrates the business can afford to service the debt. Please read our lending criteria for full information.

Myth: RLS can only be used to help recover from the pandemic

Truth: Not true. This new iteration of the Scheme is focused on business growth and recovery in a post-pandemic world, so past impact of COVID-19 is no longer considered.

Myth: Businesses aren’t eligible for RLS if they already have a loan from another government-backed scheme

Truth: Untrue. Any existing loans with other schemes do not determine eligibility. A business could still qualify for the maximum amount available under the new RLS, and keep its existing facilities, if it can afford to make the payments across all of them.

There are some instances where a Bounce Back Loan (BBL) may limit the maximum loan amount available and we may request it to be repaid before we offer an RLS loan under the new scheme. Please contact your BDM if your customer has previously taken out a BBL and was classified as a business in difficulty at the time of the BBL drawdown.

There are some maximum values of subsidy that a business is entitled to that can impact eligibility, please read the FAQs on our RLS hub for more information.

Myth: Businesses aren’t eligible if they have already received £2m (GB) or £1m (NI) from another government-backed scheme

Truth: Generally not the case. RLS does have a maximum loan amount of £2m for businesses in Great Britain, but this does not include any amount already taken with another government-backed scheme.* Also, different limits apply in Northern Ireland depending on which sector the business operates in.

*Bounce Back Loans (BBL) may be counted when calculating the maximum loan you can apply for. Please contact your BDM if your customer has previously taken out a BBL.

Myth: Sole traders, partnerships and unincorporated businesses are not eligible for RLS

Truth: Simply not true. Sole traders, partnerships and unincorporated businesses are all eligible for RLS as long as they fit the other criteria of the scheme.

Myth: Interest-only repayment terms are not available for RLS

Truth: Untrue. There are interest-only loan options available through RLS.

Here at Atom bank, this is subject to the business meeting our lending criteria.

Think RLS might be right for your customer?

Visit our RLS hub to find out more about what RLS can offer your customers. If you have any questions about the latest iteration of RLS, get in touch with our TBDM team by email at businesssupport@digitalmortgages.net or by phone on 0333 399 0060 (9am–5pm, Mon–Fri).