Growth Guarantee Scheme
The Growth Guarantee Scheme launched with accredited lenders on 1 July 2024 and is the successor to the Recovery Loan Scheme.
It encompasses a wide range of products supported by different lenders, including term loans, overdrafts, asset finance, invoice finance and asset-based lending, and is designed to support access to finance for UK smaller businesses as they look to invest and grow.
Key Features
What type of facilities are available?
The Growth Gurantee Scheme (GGS) supports a wide range of products, covering term loans, overdrafts, asset finance and invoice finance facilities and is available through the British Business Bank’s accredited lenders. Not every lender can provide each type of finance.
Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years (at the discretion of the individual lender). A term extension up to a maximum of 10 years for existing RLS facilities can be made in certain situations.
The British Business Bank administers the scheme on behalf of the Secretary of State for Business and Trade.
How does the GGS scheme work?
The GGS scheme provides the lender with a government-backed 70% guarantee against the outstanding balance of the facility. The business who borrows the funds remain 100% liable for repayment of the facility.
The maximum amount of a facility provided under the scheme is generally £2m per business group for borrowers outside the scope of the Northern Ireland Protocol, and up to £1m (or such other sum as notified from time to time by the British Business Bank to the lender in accordance with the relevant legal agreement(s)) per business group for Northern Ireland Protocol borrowers.
Minimum facility sizes vary, starting at £1,000 for asset finance, invoice finance and asset-based lending (albeit these minimums will vary from lender to lender) and £25,001 for term loans and overdrafts.
Lenders should only be offering finance facilites through GGS if they are unable to offer a facility on equivalent or better terms without the guarantee.
What can GGS facilities be used for?
A Business may use the finance for any legitimate business purpose – including managing cashflow and investment so long as it is able to afford to take out additional debt finance for these purposes.
Pricing and Access
Pricing
The fees and interest rates charged will vary from lender to lender and will depend on the specific lending proposal. The lender’s pricing will take into account the benefit of the Government guarantee.
Access
Whilst A Business that took out a CBILS, CLBILS, BBLS or a Recovery Loan Scheme (RLS) facility before 30 June 2024 are not prevented from accessing GGS, borrowing under these previous schemes will reduce the maximum amount the borrower is eligible for.
Subsidies
Facilities provided through the Growth Guarantee Scheme (GGS) are subsidies. This is because these facilities are supported by the government, and they give an advantage to the business that receives them. While the business remains liable to repay 100 per cent of the GGS facility provided by a lender, the facilities are backed by a government guarantee which enables the lender to provide the facility to the business.
There is a limit to the amount of subsidy that may be received by a borrower, and its wider group, over any rolling three-year period. Any previous subsidy may reduce the amount a business can borrow.
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FAQs
What type of business is eligible for the scheme?
As long as the business can satisfy the other eligibility criteria the scheme is open to:
- sole traders
- corporations
- limited partnerships
- limited liability partnerships
- co-operatives and community benefit societies
- legal entities carrying out business activity in the UK.
The business must generate more than 50% of its turnover from trading activity in the UK.
Charities and further education establishments are exempt from complying with this criterion for facilities offered after 9 March 2023.
What documentation will a lender require?
Whilst this may vary in part from lender to lender, in general applying for finance will require certain evidence to show affordability to repay the facility. This will include the following:
- Management accounts
- Business plan
- Historic accounts
- Details of assets
- Details of previous subsidy awards
The decision-making on whether a business is eligible for GGS is delegated to the accredited GGS lenders.
Is security required for an GGS?
This may vary from lender to lender but in general lenders are allowed to take personal guarantees for facilities of all sizes, if taking a personal guarantee is part of their typical lending practice.
Lenders cannot take the principal private residence as security for a GGS facility.
Can GGS be used for refinance?
A GGS facility may be used in certain circustances to refinance existing debt where the business meets the GGS eligibility criteria. For example, where a business is seeking to put itself on a more stable financial footing or to improve its working capital position, in principle an GGS facility could be provided.
Refinancing of exisiting schemes including CBILS, BBL and RLS is also permitted where total financing needs (including any increase) are greater than the minimum facility sizes available under GGS
Any re-financing will be considered as a new application for GGS , and will be subject to meeting the eligibility criteria and the lender’s criteria. Re-financing can be sought via the existing or a different accredited lender.
Existing BBLS borrowers are able to refinance under GGS, however, borrower protections and scheme eligibility/terms under these schemes differ. Businesses should seek advice whether this is the correct action to take.
Next Steps
Given the multitude of GGS providers available, trying to find the most suitable type for your business, and finding the perfect lender for your specific business circumstances can be a labour-intensive and time-consuming process.
Therefore it’s a good idea to seek independent, specialist financial advice before deciding on the right type of finance to apply for.
For an initial no obligation call or meeting, please contact us to arrange.