New rules around liability for the New RLS mean that the scheme may not be as attractive as its forerunner.

When the government-backed recovery loan scheme (RLS) was wound down in the summer of 2022, we were among those who said that the withdrawal of support for SMEs was premature. Andrea Reynolds, co-founder and CEO at Swoop predicted that there would be a replacement for the scheme – and sure enough, the new RLS has now been unveiled by the government.

RLS may be back, but the new iteration has a number of important updates that would-be borrowers should be aware of.

Perhaps the biggest impact on both lenders and borrowers is the introduction of a personal guarantee as part of securing the funding. One of the biggest attractions of the scheme and a big driver of the 19,000 businesses that have secured funding under the RLS since April 2021 is that businesses that were seeking £250,000 or below did not have to give a personal guarantee. This explains why the average loan value given out through the scheme sits at £202,000. With the personal guarantee coming into play, it will mean that lenders will no longer be able to go straight to the government for full security over the loan, and it will drive borrowers to shop around more. Borrowers may find alternatives with better terms, or even entirely different products such as asset finance.

The other major impact for borrowers under the new RLS rules is the removal of the requirement to demonstrate Covid-19 impact on a business. In the previous iterations of the scheme, business owners had to show how Covid-19 had affected their business as a qualifier to receiving financing. With the removal of this requirement, it will open the product line out to the business owners who either started or grew their businesses over the last two years, presenting a new funding opportunity to a whole tranche of business owners who were previously ineligible for the scheme.

The result is that the government has widened the criteria on one hand, and made the RLS less attractive as a proposition on the other. As Rhys Cunnah, Head of Unsecured and Asset Finance at Swoop says:

“While it’s great to see the government respond to the ongoing crisis in business funding, the personal guarantee is a huge change from previous government-backed schemes. I feel that there could be better alternatives in the market for SMEs to access funding away from RLS.”

If news of the new RLS has prompted you to consider funding, you should not limit your search to the lenders within the scheme. Funding will be available elsewhere, perhaps on better terms and possibly better tailored to your needs.

Swoop makes it easy to understand your options across the whole market by putting them all in one place. Make sure you are signed up and within minutes, find out how much you can borrow for your business