Life after RLS

4 Minutes

With the government’s Recovery Loan Scheme over, what will the lending landscape look like for businesses in the next half of 2022?

The Recovery Loan Scheme (RLS) was the cornerstone of the UK government’s help for businesses through the pandemic. Lenders were encouraged to agree on finance at favourable rates thanks to the government backing a percentage of the loan.

As the immediate threat of Covid has waned the details have changed, but essentially, the scheme stayed in place until 30 June 2022. Andrea Reynolds, Founder and CEO at Swoop says that from the financial industry’s point of view, the end of the scheme will not make a huge impact:

“The end of RLS means that things will change, but there are no sudden shocks here. Many lenders quietly closed their books on RLS long before they reached the deadline. There has been a feeling that businesses which needed the money would’ve already come forward, so actually finding loans under RLS in the last couple of months has been getting more difficult.”

Rhys Cunnah, Head of Unsecured Lending at Swoop says that RLS has become less relevant to businesses:

“In the early days of the pandemic, there was understandable panic about where funding would come from. Today, we are seeing that there are more options open to businesses that want to borrow. RLS products, where available, may not have been the right fit for businesses and they may not represent the best deals for borrowers. We expect that a number of RLS customers will want to refinance when the outlook settles.”

Andrea says that the future of funding is likely to be around innovative products that answer specific needs and represent value for money:

“Customers have more choice and rather than applying for a loan may be more likely to consider alternative funding, such as merchant cash advances or invoice finance.”

Have the banks ruined their chances with customers?

“The banks that will do well will be those that embrace new ways of borrowing that have been pioneered by challenger banks and disruptive lenders. Banks know that they must match these disruptors for speed of decision and processes. Many banks have a great range of products but they are not meeting the customers’ need for speed as well as digital upstarts.”

The future of finance, says Andrea, is in niche products that suit customers’ needs better:

“Businesses that need money often go to their banks first, but they are not always the best place to go as competition is fiercer in the rest of the market: customers want money cheap, they want flexibility and they want a decision fast – all of which they can get without going to a traditional bank. The only thing that stops people from finding them is knowledge, which is why Swoop has worked hard to present customers with all their options in one place and make it easy to apply. Banks are currently enjoying being the first port of call for borrowing, but need to work hard to match the new lenders for speed, agility and flexibility.”

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