One of the main reasons lenders reject a borrowing application for an unsecured loan is ‘lack of affordability’.
But what does affordability mean for pandemic stricken contractors, restaurants, shops, hotels, manufacturers, wholesalers, and professionals?
Conversations with Recovery Loan Scheme (RLS) accredited lenders have been indicating that if businesses were able to afford a loan prior to Covid (2019 accounts) and they have started to get back to pre-Covid levels they would genuinely be eligible for a RLS backed loan.
RLS lenders understand if due to Covid the 2020 accounts didn’t show affordability. However, the loan would need to have been affordable pre-Covid.
Beyond the RLS, what does cashflow loan affordability look like with lenders?
For example,
A loan larger than 25% of 2019 turnover
Loan Amount ÷ Typical Monthly Revenue
