Consultant Zone

Recovery Loan Scheme

While the Government’s Bounce Back Loan Scheme (‘BBLS’) and Coronavirus Business Interruption Loan Scheme (‘CBILS’) may have closed, they have been replaced by another loan scheme, also designed to provide financial support to UK businesses, named the Recovery Loan Scheme (‘RLS’).

Like the previous schemes, the RLS is initially available through several lenders accredited by the British Business Bank with new lenders regularly being added. Firms who have already borrowed from the previous schemes are able to borrow from the RLS, but any previous borrowing may limit the amount available.

Most of the lending under the RLS will not be considered as a regulated activity and therefore, in theory, most loan applications will fall outside the FCA’s perimeters. But no funder or lender should consider that as a get out of jail card. The FCA rules will apply as usual to any regulated lending under the scheme e.g. regulated asset finance. Therefore, FCA rules such as assessing creditworthiness need to be complied with. Additionally, requirements under the Money Laundering Regulations will continue to apply and lenders should undertake fraud checks on all RLS applications.

But applying our experience to the debate, most RLS lenders are regulated entities and therefore high-level principles for business and senior management responsibilities apply to them anyway, whether the individual transaction is regulated or not. Fitness requirements are all encompassing; firms cannot simply dismiss poor outcomes on a narrow assessment of the regulatory status of an individual transaction.

In our view, independent oversight of the decisioning process is critical. RLS has some bear traps for funders and lenders which they need to monitor. As an example, a key aim of the scheme is to improve the borrowing terms for firms, but what if a lender can offer a firm a commercial loan on better terms, without requiring the guarantee provided by the RLS? Surely the simple answer is the loan without the guarantee should be offered, right? But the individual circumstances need to be considered and that is exactly where we can help – with independent reviews and oversight.

Whether a funder or lender give us a call to see how we can help you manage and mitigate risks in funding reviews. As a fully registered FSQS supplier, you can retain our services without lengthy onboarding/procurement processes – another quick win.