During the first year of the pandemic, from April 2020 to 2021, the government in the UK borrowed a staggering £299 billion.
This was the highest such figure since 1946, and while borrowing is expected to come in a little lower at around £200 billion between April 2021 and 2022, the government will have leveraged debt in excess of £500 billion in barely two years.
This borrowing also included the so-called “Recovery Loan Scheme” (RLS) in April 2021, but what exactly is this and is it likely to be extended beyond the summer?
What is the RLS?
As we’ve already touched on, the RLS was initially launched last April with the express aim of supporting access to finance for UK businesses, particularly as they continued to recover from the financial and socioeconomic impact of the coronavirus.
Initially, the RLS was intended to run until the end of 2021 (subject to a review), but the Autumn Budget of last year announced that it would be extended provisionally through June 2022.
This extension also saw the RLS scheme be revamped on January 1st, with a lower maximum amount available to qualifying firms (£2 million) and a reduced government guarantee of 70%.
There are now more than 70 accredited lenders, who are equipped to provide lending for a period of up to six years to firms that meet a broad range of criteria.
How Can This Extended Loan Benefit Businesses?
Not all businesses are created equal, of course, and while brick-and-mortar shops and retailers experienced a marked decline through 2020 and last year, the ecommerce market achieved record growth.
According to the Bank of England (BoE), the extensive spread of Covid-19 on these shores and subsequent lockdown measures precipitated a fall in retail sales of around 30% during Q2 2020.
Sales have since recovered gradually, of course, and while further increases are forecast through 2022, there remains an interim need for businesses to leverage support and maintain the cash flow levels.
Fortunately, businesses of different sizes have been able to access the RLS scheme, which offers funding from £30k all the way up to £2 million and can help ventures to tailor their lending to suit their precise needs.
This scheme is noticeable for its accessibility and flexibility, creating a scenario where many different types of businesses in various sectors can apply for funding.
Similarly, the scheme provides financial assistance for an extended period of time, which will help to account for different rates of recovery against the backdrop of economic uncertainty.