Alternative funding to the Recovery Loan Scheme (RLS)
There are a lot of business owners in the United Kingdom that are struggling to find the right type of funding for their business venture. The Recovery Loan Scheme was introduced by the government in the heat of Covid 19 to help small and medium scale enterprises get the financing they need to stay afloat. Many months in recovery from Covid-19, the RLS has not been discontinued, however, it is now increasingly harder to get funds from it as it was mainly set up for Covid relief. But, like any other type of loan, there are advantages and disadvantages to using the Recovery Loan Scheme. In this article, we will explore some of the alternative funding options available to business owners in the UK, in order to help you make the best decision for your company.
What is the Recovery Loan Scheme (RLS)?
The Recovery Loan Scheme (RLS) is a financial loan scheme that was introduced by the UK government in April 2021. The scheme is designed to provide support to businesses that have been affected by the COVID-19 pandemic.
How does the RLS work and who is eligible for it?
The RLS works by providing businesses with access to finance through a network of accredited lenders. Businesses can apply for loans of up to £10 million, with a maximum term of six years. The government will guarantee 80% of the loan amount. To be eligible for the RLS, businesses must be based in the UK and have been adversely affected by the COVID-19 pandemic.
Benefits of the RLS compared to other forms of funding available in the UK market today?
The main benefit of the RLS is that it provides businesses with access to finance that they may not be able to get from traditional lenders. The scheme also offers competitive interest rates and repayment terms.
What are some of the drawbacks of using the RLS as a form of financing your business?
The main drawback of the RLS is that it is in its basic form just another loan, which means that businesses will have to repay the loan amount plus interest. There is also the risk that businesses will not be able to repay the loan, which could lead to the loss of assets.
Are there alternatives to the RLS Financing Scheme?
It’s important to know that the RLS isn’t the only funding option available to businesses in the UK. There are a number of alternative funding options that business owners can explore that can possibly be a more fitting option for the nature of the business.
Let’s take a close look at a few alternatives to the Recovery Loan Scheme in the finance market today:
Asset finance
Asset finance is a type of financing that allows businesses to borrow money against the value of their assets. This includes equipment, machinery, and vehicles. The asset is used as collateral for the loan, which means that the lender can repossess the asset if the borrower defaults on the loan.
Invoice financing
Invoice financing is a type of funding that allows businesses to borrow money against the value of their outstanding invoices. The lender will advance the business a percentage of the invoice value, and the business will repay the loan plus interest when they receive payment from their customer.
Revolving credit facility
A revolving credit facility is a type of loan that allows businesses to borrow money up to a certain limit. The business can choose to draw down the loan amount as they need it and make repayments on the loan as they are able. This type of funding can be useful for businesses that have unpredictable cash flow.
Business credit card
A business credit card is a type of financing that allows businesses to borrow money up to a certain limit, which can be used for business expenses. Businesses will need to make repayments on the outstanding balance, plus interest and fees.
Construction Financing loan
Construction financing is a type of loan that is specifically for businesses that are building or renovating commercial property. The loan can be used to cover the cost of materials, labour, and other associated expenses.
Mezzanine financing
Mezzanine financing is a type of funding that is a hybrid of debt and equity. Businesses can raise mezzanine financing by issuing bonds or taking out a loan. The funds can then be used for a variety of purposes, such as expanding the business or acquiring another company.
The Recovery Loan Scheme is a great option for businesses that have been affected by the COVID-19 pandemic. However, it is important to weigh the advantages and disadvantages of using the scheme before making a decision. There are a number of alternative financing options available, so be sure to explore all of your options before making a decision.
