Allica Bank launches five-year interest-only commercial mortgages


nick baker allica bank

Allica Bank, the business bank dedicated to the needs of established businesses, has extended its owner-occupier commercial mortgage offering to include interest-only terms of up to five years.

It has been able to do so due to the British Business Bank’s Recovery Loan Scheme (RLS), which a business must be eligible for to access the product.

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 an even greater number of established small and medium-sized businesses with their expansion plans, has remained an untapped opportunity, with many business owners not realising 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 businesses that took out previous government-backed loans (e.g., Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS)).

Businesses can access up to £2 million through Allica’s RLS-backed loans, subject to eligibility.

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, a number of misconceptions about the RLS scheme may have led to some brokers and businesses believing they wouldn’t be eligible.

Nick Baker, Chief Commercial Officer at Allica Bank, said:

“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.

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 (RLS) – as we look to help an even wider pool of businesses achieve their goals.”