What is the Growth Guarantee Scheme (GGS)?
In the Spring 2024 Budget, the Chancellor announced that the Recovery Loan Scheme, initially created to assist the UK’s small businesses during the pandemic with government-backed loans, will be extended until 2026. This scheme has been rebranded as the Growth Guarantee Scheme (GGS), though the terms largely remain the same.
Similar to the Recovery Loan Scheme (RLS), the GGS offers lending options such as term loans, overdrafts, asset finance, and invoice finance.
The maximum facility size remains £2 million for businesses in Great Britain and £1 million for those within the Northern Ireland Protocol’s scope. The British Business Bank will continue managing the scheme on behalf of the Secretary of State for the Department for Business, Energy, & Industrial Strategy (BEIS).
Under the Growth Guarantee Scheme, as with RLS, the government guarantees 70% of the lending to each eligible business. This means the government covers 70% of the lender’s potential loss if a business defaults, while businesses are still responsible for 100% of the borrowing.
The eligibility criteria are unchanged, with the key requirement being that borrowers must have a maximum turnover of £45 million.
While the GGS aims to improve loan terms for UK businesses, these terms reflect the security provided by the 70% government guarantee to lenders (e.g., typically higher interest rates). Notably, some businesses might find better commercial loan terms by registering with British Business Funding.
It’s also beneficial to register with us if you’re looking to refinance existing loans (e.g., pandemic-related loans) or need additional funds to support your growth plans. We’ve simplified the process of finding out what finance options you qualify for, whether it’s a startup loan, a loan to cover your VAT bill, or a short-term loan for working capital.
How does the Growth Guarantee Scheme work?
Businesses can apply for a loan under the Growth Guarantee Scheme through various accredited lenders or with the assistance of a broker like British Business Funding.
Our team can assess if you have a higher chance of obtaining lending through the Growth Guarantee Scheme, designed to support businesses that might not meet standard lending criteria.
As with the Recovery Loan Scheme, 70% of the lending is guaranteed by the government. This guarantee is to the lender; businesses remain 100% liable for the full borrowing amount under the Growth Guarantee Scheme.
GGS encompasses term loans, overdrafts, asset finance, and invoice financing.
When do businesses need to repay the money?
The repayment terms depend on the type of finance chosen. Under the Growth Guarantee Scheme, lending terms can extend to:
– Six years for term loans and asset finance facilities (minimum three months)
– Three years for overdrafts and invoice finance facilities (minimum three months).
When does the Growth Guarantee Scheme start and end?
The Growth Guarantee Scheme started on July 1st, 2024, and will end on March 31st, 2026.
Why has the government extended and renamed the Recovery Loan Scheme?
In February 2024, the government declared it “the year of the SME” as it relaunched the Help to Grow campaign, established a small business council, and extended (and renamed) the Recovery Loan Scheme by nearly two years. The Growth Guarantee Scheme will continue until March 2026, enabling an estimated 11,000 smaller businesses to access necessary finance.
The measures announced in 2024 underscore the significance of UK smaller businesses to the economy:
“Almost every business in the country is a small business (99.9%), supporting 27 million jobs across the UK and accounting for £4.5 trillion in annual turnover – hence the government designating 2024 as the year of the SME.”
The Growth Guarantee Scheme aims to provide crucial support to smaller businesses nationwide.
How does the Growth Guarantee Scheme differ from the Recovery Loan Scheme?
The GGS is essentially an extension of the third and final iteration of the Recovery Loan Scheme and is ‘broadly unchanged’, according to the British Business Bank.
How much can I borrow under the Growth Guarantee Scheme?
Businesses can borrow up to a maximum of £2 million per business for all borrowing types, including term loans, overdrafts, invoice finance, and asset finance. This £2 million cap is the same as it was for the Recovery Loan Scheme in Great Britain, and £1 million for those under the Northern Ireland Protocol.
Businesses in Great Britain can apply for:
– Loans or overdrafts between £25,001 and £2 million
– Invoice or asset finance between £1,000 and £2 million.
Businesses within the Northern Ireland Protocol can apply for:
– Loans or overdrafts between £25,001 and £1 million
– Invoice or asset finance between £1,000 and £1 million.
Which businesses are eligible for the Growth Guarantee Scheme, and what are the criteria?
The following types of businesses are eligible for GGS:
– Sole traders
– Limited partnerships
– Limited liability partnerships
– Corporations
– Co-operatives and community benefit societies
– Any other legal entities conducting business activity in the UK through a business account.
To access the scheme, a business must:
– Have a turnover of less than £45 million
– Have been trading in the UK for at least two years
– Generate more than 50% of its turnover from trading activity in the UK, unless applying as a registered charity or further education establishment
– Be viable (i.e., the lender must consider the borrower’s business proposition viable)
– Not be in collective insolvency proceedings or any other business difficulty
– Intend to use the lending for a business purpose.
Three additional points:
– Lenders must conduct credit and fraud checks for all Recovery Loan Scheme applicants – checks and approaches vary by lender.
– Lenders may take personal guarantees, in line with standard commercial lending practices, but Principal Private Residences cannot be used as security within the scheme.
– If a lender can offer finance on normal commercial terms without using the scheme, it is expected to do so.
Which businesses are not eligible for the Growth Guarantee Scheme?
While the Growth Guarantee Scheme is widely available to UK businesses, some are excluded:
Ineligible entities include:
– Banks
– Insurance companies
– State-funded schools
– Public sector bodies
– Individuals (excluding sole traders or partners acting on behalf of a partnership).
Can sole traders access GGS?
Yes, sole traders can apply for the Growth Guarantee Scheme. Provided they meet the other eligibility criteria, GGS is open to:
– Sole traders
– Corporations
– Limited partnerships
– Limited liability partnerships
– Co-operatives and community benefit societies
– Any other legal entity conducting business activity in the UK through a business account.
What are the interest rates?
Unlike RLS, where fees were capped at 14.99%, interest rates and fees for loans under the Growth Guarantee Scheme can vary based on your loan details. However, lenders must pass on any benefits from the guarantee to your business, after covering their own costs, such as the lender fee.
To find out the specific rates available to you, your first step is to register with British Business Funding.
What is the government guarantee?
The government guarantee means that if a business defaults on any lending under the Growth Guarantee Scheme, the lender can reclaim 70% of the outstanding loan value from the government. This guarantee encourages lenders to lend to businesses. As the borrower, you remain 100% liable for the debt.
What can the funds be used for?
Businesses that successfully apply for Growth Guarantee Scheme finance can use the funds for any legitimate business purpose, such as:
– Managing cash flow
– Purchasing equipment
– Covering one-off costs
– Supporting payroll
– Investing in marketing
– Expanding the business.
Can businesses apply if they’ve previously had a Recovery Loan, Bounce Back Loan, CBILS, or CLBILS?
Generally, yes, but there are some considerations:
The borrowing cap is £2 million in Great Britain and £1 million in Northern Ireland at a business group level, including any outstanding debt under CBILS or RLS. For instance, if a business group in Birmingham has borrowed £500,000, the maximum borrowing across the rest of the group is £1.5 million.
You can use GGS to refinance existing RLS or CBILS loans; refinancing will be treated as a new GGS application, subject to eligibility and lender criteria. Refinancing can be sought with your current or a different accredited lender.
Existing Bounce Back Loan Scheme borrowers can also refinance under GGS, but be aware that borrower protections and terms differ from RLS and CBILS. If unsure, register with British Business Funding to explore your options.
Can businesses with bad credit apply?
Businesses with bad credit may have fewer GGS options and typically face higher interest rates. However, like the Recovery Loan Scheme, businesses previously refused credit might still be eligible for GGS. Lenders evaluate each application on a case-by-case basis.
If GGS isn’t suitable, consider other business loan and finance options. Register with British Business Funding to understand your choices.
How much was borrowed under the Recovery Loan Scheme (the Growth Guarantee Scheme’s predecessor)?
The first two iterations of the Recovery Loan Scheme supported UK smaller businesses with £4.3 billion in finance. The third and final iteration, launched in August 2022, provided over £1 billion in finance, with about 80% of facilities offered outside London and over 90% supporting businesses with fewer than 50 employees.
Will I need a credit check to apply?
Yes, lenders will perform a credit check and possibly a fraud check. The types of checks may vary between lenders. Even if you have been refused credit in the past, you may still qualify for lending under the Growth Guarantee Scheme.
Can a business in difficulty apply?
If your business is in insolvency proceedings, you won’t be eligible. Additionally, you must have a viable business proposition as judged by the lender to obtain a loan under GGS.
Do exporters qualify?
Yes, exporters are eligible, but there are restrictions. You cannot use the funding to:
– Run an advertising campaign outside the UK
– Manufacture products only available to customers outside the UK
– Establish a representative office or appoint an agent outside the UK
– Set up or operate a distribution network outside the UK
– Fulfil a direct export order.
Exporters must self-certify that they will not use GGS funds for these purposes.
Am I eligible if I have received EIS?
Yes, as long as you meet the other criteria. However, Northern Ireland applicants cannot exceed a cap of €15 million in risk finance aid or a combination of risk finance and de minimis aid. Relevant risk finance schemes in the UK include the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT), and the Seed Enterprise Investment Scheme (SEIS). If your business has received risk finance aid totaling more than €14.8 million, you will not be eligible for this scheme.
Tips for applying for the Growth Guarantee Scheme
– Clearly outline the purpose of the loan in your business plan.
– Prepare necessary paperwork, such as management accounts, financial accounts, and information about business assets. British Business Funding (and all lenders) will use this to assess loan affordability and viability.
– While you can apply directly to a lender, we recommend applying via British Business Funding. Our Funding Managers can identify suitable borrowing types and lenders, saving you the effort of contacting multiple lenders and minimizing credit checks.
– Ensure fees and interest are factored into your forecasts.
Mistakes to avoid when applying
– Match your financing to your cash flow needs: term loans and asset finance facilities are for up to six years; overdrafts and invoice financing facilities are for up to three years.
– Don’t borrow more than you can afford. Know how you will repay your loan, especially if you provide a personal guarantee (note that the lender cannot use your principal private residence as security). Keep realistic cash flow forecasts and stress-test them.
– Be sure you’re applying for the right financing from the right lender. British Business Funding can help you navigate available products and save time for running your business.
– Avoid high interest rates. If declined by one lender, another might offer a loan at a higher rate. Apply through British Business Funding to avoid this pitfall.
How do I apply?
Applying is simple and fast via our online application. Answer a few questions about yourself and your business.
We will keep this page updated with any government updates.