Can I Apply For The Recovery Loan Scheme With Bad Credit?

Jul 4, 2022

George Holmes

George Holmes

Managing Director + Co-Founder

The Recovery Loan Scheme (RLS) was first announced in the Spring Budget by the Chancellor. It was created to replace previous loan schemes such as The Bounce Back Loan Scheme, the Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme – all of which stopped accepting applications at the end of March 2021. The goal of the RLS is to help businesses of all sizes grow and recover from the difficulties of the pandemic.

But can you apply for the Recovery Loan Scheme with bad credit? Undoubtedly a question many businesses want to know the answer to, so we thought we’d shed a little light on the situation. In this post, we’ll discuss the RLS in greater depth and confirm whether you can apply if you have a less favourable credit rating.

Please note: The Recovery Loan Scheme (RLS) is due to end on 30th June 2022. If you are too late, there are still plenty of options available to you. At Aurora Capital, we have access to a portfolio of accredited lenders who can offer asset finance facilities, invoice finance facilities and more to support businesses like yours in accessing the capital they need.

What is the Recovery Loan Scheme (RLS)?

The Recovery Loan Scheme is a government-backed scheme designed to help UK businesses, supporting borrowing of up to £10 million for individuals and £30 million across group businesses. Once received, businesses can use the funds for any legitimate business purposes such as growth, investment and managing cash flow or business assets.

The scheme provides lenders with a guarantee of 80% on losses that arise on facilities up to £10 million. Additionally, lenders can offer an RLS facility if they are unwilling to lend money on the same terms or are only prepared to do so at a higher cost.

A lender may also require forms of security, such as personal guarantees. However, if the loan is for less than £250,000, personal guarantees are unlikely to be required. Loans above this amount do require forms of security, and it is very much at the lender’s discretion whether or not they will ask for personal guarantees. It’s important to note that your residential property will never be taken as security for the Recovery Loan Scheme.

Also, businesses will be eligible to apply for the Recovery Loan Scheme regardless of if they have already borrowed using previous Covid-19 lending schemes. However, anyone who borrowed by using previous schemes will have the amount deducted from their maximum allowance of the RLS. You can find additional details on our Recovery Loan Scheme page or the British Business Bank website.

Who is the RLS for, and am I eligible?

The Recovery Loan Scheme is for small businesses or large companies who have suffered financially as a result of the Covid-19 pandemic and require support in the form of funds. Whether you’re looking to get your company back on track or even back up and running after the fallout of the pandemic, the scheme offers the necessary funding to do so. As long as you use the money for business-related purposes, you can use it however you like. Also, loans up to £250,000 do not need a personal guarantee.

So, how does a business owner know if they are eligible for the Recovery Loan Scheme? Well, any UK business that has traded for longer than two years, and has a turnover of £100k before Covid-19, is eligible to apply for the Recovery Loan Scheme. Additionally, you also need to take note of the following:

You are eligible if your business:

  • Has been impacted by Covid-19. You will need to prove to the lender that the coronavirus pandemic has impacted you financially
  • Will be trading in the UK
  • Has a viable business proposition. If there are concerns about short or medium-term business performance, your eligibility in this regard may differ from lender to lender

You will not be eligible if your business:

  • Is in ‘collective insolvency proceedings’
  • Is a Bank, building society, insurer or reinsurer (not including insurance brokers)
  • Is within the public sector
  • Is a state-funded school (primary or secondary)

If your business has been affected by Covid-19 and you’re in need of additional funding to stay afloat or continue growing, but you don’t meet the eligibility criteria, don’t worry. You have options. The helpful team here at Aurora Capital will endeavour to find alternative financial solutions to help you and your business.

What you need to apply for the RLS

Below, we’ll cover eligibility for the Recovery Loan Scheme with bad credit, as well as what you need in order to apply for the RLS in general. As you can guess, it’s essential for your business to adhere to the basic requirements for the RLS above. This means your business has to have been impacted by Covid-19, you will be trading in the UK, and you have a viable business proposition proving that you will be using the funds for appropriate costs/needs.

Of course, the first two criteria should be obvious to any business owner considering applying for the Recovery Loan Scheme. However, a solid business proposition may require a bit of extra work, as it’s important to be as clear and informative as possible when preparing it. It’s essential to clearly prove to lenders that you not only will use the funds for purposes that adhere to the RLS eligibility, but they may also ask for additional information such as recent accounts, cash flow forecasts, etc.

But how does one apply? That’s the simple part – just visit our RLS service page to learn more and compare RLS loan options to discover which is best for you. You can also discuss your needs and options for interest payments with our team!

Recovery loan scheme: bad credit applications

So, the big question. Can you still apply for the Recovery Loan Scheme with bad credit?

Just like with any other financial application, credit and fraud checks will need to be performed. This also tends to be the same for other business loans. The RLS is for businesses that have suffered during the pandemic and no one else, so lenders must ensure the funds go to the people who need them and will be used appropriately.

When applying for the Recovery Loan Scheme with bad credit, you may find that it may restrict your financial options and the interest rates you can secure. If you have been refused credit previously, you may still be able to apply. Every case and business is unique. It’s not a ‘one size fits all’ scheme and our team reviews applications on a case-by-case basis.

However, if you are unsure whether you will qualify or be offered credit, or you’re concerned about credit and fraud checks specifically, why not explore all of the finance options available to your business? At Aurora Capital, businesses can benefit from a range of funding options, including asset and invoice finance for UK businesses or other term loans.

Has your business suffered financially during the pandemic? Are you looking to learn more about applying for the Recovery Loan Scheme with bad credit? Get in touch today to discuss your needs with our helpful team and find out how the RLS can help you!

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