The offer is supported by the Recovery Loan Scheme
Allica Bank has announced that it has extended its owner-occupier commercial mortgage offering to include interest-only terms of up to five years.
The bank said it has been able to introduce the product due to the British Business Bank’s Recovery Loan Scheme (RLS), for which a business must be eligible to avail the offer. Without the RLS, Allica was only able to offer a short interest-only period at the beginning of a longer-term amortising loan.
The scheme, which will enable it to support a greater number of established small- and medium-sized businesses with their expansion plans, has remained an untapped opportunity, according to the bank, saying many business owners do not realise they can benefit from it.
The Recovery Loan Scheme is available to accredited lenders, such as Allica, to support loans to eligible businesses that would otherwise be outside of their credit appetite.
Businesses that can benefit must have a turnover of up to £45 million and can include those that took out previous government-backed loans such as the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), and the Bounce Back Loan Scheme (BBLS)). Businesses can access up to £2 million through Allica’s RLS-backed loans, subject to eligibility.
Specific limitations and exclusions of the scheme are listed in a dedicated page on the bank’s website.
The bank said it has prioritised launching the product following extensive feedback in its broker survey in late-2022, which revealed a clear demand for interest-only products among brokers. However, Allica believed that a number of misconceptions about the RLS scheme may have led to some brokers and businesses believing they wouldn’t be eligible.
“A lack of understanding of the Recovery Loan Scheme has meant many businesses are missing the opportunity to secure the finance to grow at a time when the British economy needs growth more than ever,” said Nick Baker (pictured), chief commercial officer at Allica Bank. “Many business owners, for example, think they can only use an RLS-backed loan to help with recovery from the COVID pandemic, but really, it can support with all types of situations, such as buying commercial property, acquisitions and refinancing.
“The additional paperwork is also a lot easier than many people realise, with much of the extra admin falling on the lender rather than the borrower. We’re delighted to be able to offer interest-only, owner-occupied commercial mortgages with terms of up to five years – which we’re only able to do, thanks to the Recovery Loan Scheme – as we look to help an even wider pool of businesses achieve their goals.”
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