The UK Growth Guarantee Scheme (GGS) is an exciting new initiative designed to support smaller businesses as they invest in growth and expand their operations. As the successor to the Recovery Loan Scheme, GGS aims to improve access to finance and offer better borrowing terms, helping businesses across the UK thrive even in uncertain times.
What is the UK Growth Guarantee Scheme?
Launched on 1 July 2024 with a network of accredited lenders, the Growth Guarantee Scheme provides UK-based smaller businesses with the financial support they need to invest in their future. At its core, the scheme offers a government-backed guarantee—70% of the outstanding balance of the facility—which gives lenders the confidence to offer better terms to borrowers. This means that businesses can secure loans with more favorable conditions while maintaining financial stability.
Key Features and How It Works
1. Flexible Facility Sizes:
- For Most Businesses: Borrowers outside the scope of the Northern Ireland Protocol can secure facilities of up to £2m per business group.
- For Northern Ireland Protocol Borrowers: The maximum is generally up to £1m, though this may vary based on specific sector restrictions such as agriculture and fisheries.
- Minimum Facility Sizes: These start at £1,000 for asset finance, invoice finance, and asset-based lending, and at £25,001 for term loans and overdrafts.
2. Wide Range of Financial Products:
GGS supports multiple types of lending products including term loans, overdrafts, asset finance, invoice finance, and asset-based lending. This flexibility allows businesses to choose the product that best meets their needs, whether they are managing cash flow or investing in growth.
3. Varied Term Lengths:
- Term Loans & Asset Finance: Available from three months up to six years.
- Overdrafts, Invoice Finance, & Asset-Based Lending: Available from three months up to three years.
4. Improved Loan Terms:
The scheme is designed to improve the terms on offer to borrowers. If a lender can offer a commercial loan on better terms, they will do so. This benefit can help reduce the overall cost of borrowing and make repayments more manageable.
5. Borrower Responsibility:
While the government guarantees 70% of the facility to the lender, the borrower remains 100% liable for the debt. Lenders retain decision-making power, ensuring that all standard credit and fraud checks are conducted before approving a facility.
Eligibility and What It Means for Your Business
To qualify for the Growth Guarantee Scheme, businesses must meet several criteria:
- Turnover Limit: The scheme is open to smaller businesses with a turnover of up to £45m on a group basis.
- UK-Based Trading: Applicants must conduct trading activity in the UK, with more than 50% of income generated from trading.
- Viability and Financial Health: Lenders must deem the business viable and not in difficulty, meaning businesses in insolvency or similar proceedings are excluded.
- Subsidy Limits: Borrowers need to confirm that the GGS facility will not cause them to exceed the allowed subsidy limits over a rolling three-year period.
These eligibility criteria ensure that the scheme targets businesses with a solid foundation and potential for growth, while also safeguarding public funds.
How the Scheme Can Benefit Your Business
1. Access to Affordable Finance:
By offering a 70% government-backed guarantee, lenders are more willing to extend credit on favorable terms. This means lower interest rates and fees, reducing the cost of borrowing and easing cash flow pressures.
2. Enhanced Flexibility:
The broad range of financial products available means that whether you need short-term cash flow management or long-term investment finance, there’s a GGS-backed solution for you.
3. Supports Growth and Expansion:
With the ability to secure up to £2m (or up to £1m for certain borrowers), the scheme provides the capital needed to invest in new projects, expand operations, or explore international markets, fueling business growth.
4. Improved Financing Options:
Having a GGS-backed facility can enhance your credit profile, making it easier to secure additional funding in the future. Banks and investors view such arrangements as a sign of financial stability and reduced risk.
5. Strategic Financial Planning:
Businesses that have previously accessed schemes like the Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loan Scheme (BBLS), or Recovery Loan Scheme (RLS) can still benefit from GGS. However, it’s important to note that previous borrowing might reduce the maximum amount available under the new scheme.
Final Thoughts
The UK Growth Guarantee Scheme represents a significant opportunity for smaller businesses to access affordable finance and drive growth. With its flexible facility sizes, wide range of financial products, and improved loan terms, GGS not only supports immediate cash flow needs but also paves the way for long-term expansion and stability.
If you’re a UK-based business looking to invest in growth, now is the perfect time to explore the opportunities provided by the Growth Guarantee Scheme. For more detailed information on the scheme and a list of accredited lenders, be sure to check out the latest updates from the British Business Bank and official government resources.
By taking advantage of the Growth Guarantee Scheme, you’re not just securing a loan—you’re investing in the future of your business. Embrace the opportunity to grow confidently, knowing that support is just a step away.
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