While the total cost of coronavirus borrowing in the UK has yet to be confirmed, it was estimated that the government raised a staggering £303 billion to help combat the impact of Covid-19 through 2020/21.

This usually took the form of various business loans, with the popular and widely used ‘Recovery Loan Scheme’ helping businesses to borrow heavily to support themselves during difficult times.

However, the provision of this loan is set to end soon, so there’s limited time remaining for businesses that want to qualify. But what exactly is the scheme and why should you consider applying for it?

What is the RLS and When is it Ending?

In simple terms, the RLS is a financial support loan that was introduced specifically to help businesses consolidate and recover from the earnings lost as a result of the coronavirus.

Through the scheme, businesses can apply for different types of loan and credit, including overdrafts, invoice financing and asset-based lending (depending on their precise requirements).

Initially, up to £10 million was made available per business, while the government pledged to guarantee 80% of the finance to the lender.  

However, having been extended from 2021 to June 30th 2022 (when the scheme will finally draw to a close), the government outlined some changes to the structure of the agreement. 

More specifically, the scheme will now only be accessible to small and medium-sized businesses, while the maximum amount of finance to applicants will be capped at £2 million in total.

The guarantee coverage provided by the government has also been lowered to 70%, and it’s important to factor in these considerations before making a formal application.

Who Can Apply to the RLS?

Following the changes rolled out in January, only small and medium-sized firms can apply to join the RLS, so long as they’ve been demonstrably impacted by the pandemic and have seen their growth impeded by Covid-19 and associated lockdown measures.

At the same time, an applicant’s turnover cannot exceed £45 million, while they cannot be in insolvency or actively experiencing bankruptcy.

On a fundamental level, all applicants must also be based in the UK and conduct the majority of their business (and generate most of their turnover) on these shores.

Unsurprisingly, banks and building societies cannot apply to the RLS, while public-sector bodies and state-funded schools (either primary or secondary) are also ineligible.

What are the Benefits of the RLS?

At its core, the RLS is a flexible and relatively straightforward governmental scheme, and one that remains relatively accessible to SMEs in the UK.

The availability of different types of loan and funding is also a huge advantage to applicants, while the ability to borrow up to £2 million should provide assistance to the vast majority of firms.

However, there are also some disadvantages for potential applicants to consider. For example, the fact that the government is only guaranteeing 70% of the loan amount will be concerning to some firms, especially smaller firms that are worried about repaying their debts post-Covid.

This may also encourage lenders to be cautious when dealing with some applications, potentially preventing some firms from receiving the necessary capital.