Earlier this month Rebecca Phillips of Tribe Accounting got to grips on all things lending with Robin Goddard of Reach Commercial Finance to understand the currently available .GOV Recovery Loan Scheme, plus getting a measure of the current commercial lending appetite.
In brief, what is the Recovery Loan Scheme (RLS)?
This is a loan scheme for small and medium sized businesses to borrow up to £2million. The government are providing a 70% guarantee to support the borrowing.
What’s different to the previous government backed lending scheme the CBILS (Coronavirus Business Interruption Loan Scheme)?
The fees are paid by the borrower this time, although they are keeping them at “fairly sensible levels” according to Robin. The Business Recovery loans are capped at a 15 per cent annual rate of interest.
Robin, what makes an ideal applicant?
The ideal applicant will be a business that has been surviving through the pandemic and is coming out the other side. It will have been servicing any existing debt (such as CBILS or BBL borrowing).
The most challenging time for any business that has experienced the turmoil in the economy we have faced for the last two years are the resources to grow, whether that be slowly, through organic growth, a project or by acquisition. This is the initial starting point.
I have also seen the funds being used to buy out an existing shareholder which then enables the business to travel in a direction of growth, if that had been a limiting factor.
… and application?
Once the above has been established it is crucial that the plans for growth are documents in a business plan and forecasts. Along with these, applicants should be prepared ahead to supply:
• 12 months bank statements
• Last two year’s financial accounts
• Up to date management information, if available.
• Last four VAT returns
Ideally you will be able to have the majority of items above to hand, however you would be well positioned to have your in-house finance manager/ director or indeed your accountant helping to prepare these.
And the market in general?
Robin’s review is that the quarter 1 2022 lending market is certainly buoyant and liquid. “There is money to be lent! When you are looking it is quite key to have two horses in the race, this provides the business with options. I would recommend that if you are looking to secure a high street bank lend you allow much more time to get a decision (4-6 weeks) whereas other lenders can provide a decision within 48-72 hours of applying.”
Rebecca’s top 5 tips when it comes to business borrowing:
1. If using for a project or capital item match the funding length to the length of useful life of asset or to match once the investment on the project has been returned.
2. Check and double check the security required! It could be your home!
3. Try your bank first for general requirements (if time) as they mostly offer the lowest rates.
4. Use a specialist if it’s a specialist area you are borrowing in, for example Asset Finance, Invoice Discounting, Start Ups, Crowd Funding
5. The numbers don’t lie so ensure you thoroughly review the charges and interest rates, for the best deal you can get.
Robin Goddard of Reach Commercial Finance, has over 20 years’ experience in business development within the alternative finance market, and this has given him extensive knowledge of all aspects of commercial funding- including factoring, invoice discounting and asset-based lending.
He specialises in the providing facilities that may not met the criteria of the mainstream lenders, ranging from £50,000 to £5,000,000. He believes: “The market is full of new entrants and the choice for borrowers is now greater than it has ever been. Now is the time for a prospects to obtain wider view of the market and work with someone who is able to provide an independent and unbiased view of the funding opportunities available.”
Rebecca Phillips, of Tribe Advisory and Accounting has experience in the accountancy arena of over 13 years at a high-growth Top 100 private practice in the South of the UK, ” I worked my way from Accounts Trainee to Client Director. Following on from having that great experience I started a new chapter, by setting up Tribe Accounting in 2015 with a strong vision to provide the best value-added service to clients, where building relationships underpins the service delivery.” Tribe’s clients are owner-managed small and medium sized businesses. “My greatest passions are business consultancy, strategic and tax planning“.