Growth Guarantee Scheme Loans Explained

The Growth Guarantee Scheme (GGS) is a new Government initiative aimed at helping small businesses in the UK access the funding they need to invest and grow. Launched in July 2024, the GGS succeeds the Recovery Loan Scheme, offering a range of financial products through accredited lenders with the support of a Government-backed guarantee.

What the GGS Offers

The GGS makes it easier for British SMEs to secure loans by providing lenders with a Government-backed guarantee. The beauty of the scheme is that if a business defaults on its loan, the Government will cover 70% of the lender’s losses, reducing the risk for lenders and encouraging them to offer better terms.

Maximum Loan Amounts

The GGS allows most businesses to borrow up to £2 million. However, firms under the Northern Ireland Protocol are limited to £1 million, with sectors like agriculture and fisheries facing stricter caps too. This structure allows a wide range of businesses to benefit from the scheme.

Available Financial Products

The GGS supports a variety of financial products, including:

• Term Loans: What many view as traditional loans, where you borrow and repay a fixed amount over a set period.

• Overdrafts: This facility allows you to withdraw more money than you have in your account up to an agreed limit.

• Asset Finance: This helps you buy or lease equipment, spreading the cost over time.

• Invoice Finance: This allows you to borrow against unpaid invoices, providing immediate cash flow.

• Asset-Based Lending: You secure your loan against your business assets, such as inventory or equipment.

Loan Terms

The loan length varies depending on the type of finance you apply for. For term loans and asset finance, the duration can range from three months to six years. For overdrafts, invoice finance and asset-based lending, terms typically range from three months to three years.

Access for SMEs with Previous Loans

If your business has existing loans from previous schemes like the Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loan Scheme (BBLS) or Recovery Loan Scheme (RLS), you can still apply for the GGS. However, this might affect the maximum amount you can borrow.

Interest Rates and Fees

Rates and fees for loans under the GGS will vary depending on the lender and the specific loan proposal. The Government-backed guarantee helps keep these costs competitive, making the loans more affordable for small businesses.

Personal Guarantees

Lenders may ask business owners or directors to guarantee the loan personally, but you cannot use your home as collateral. This guarantee provides some security for lenders while protecting your personal assets.

Lender Guarantee

The Government guarantees 70% of the loan, which reduces the risk for lenders. However, SMEs are still fully responsible for repaying every penny of the loan amount. This guarantee encourages lenders to offer loans they might otherwise consider too risky to be worth their while.

Eligibility Criteria

For your business to qualify for the GGS, you must meet specific criteria:

• Turnover Cap: Your business must have an annual turnover below £45 million.

• Domestic Operations: Your business must operate in the UK and generate more than 50% of its income from trading.

• Viability: Lenders must believe your business has a viable plan for the funds and a realistic chance of repaying it promptly.

• Financial Stability: Your company mustn’t be in financial difficulty, including undergoing insolvency proceedings.

Benefits of the GGS

The GGS offers several benefits for British SMEs:

• Better Terms: If a lender is able to offer you a better deal outside of the GGS, they are required to do so. This mandate ensures your company gets the fairest terms.

• Stronger Support: The GGS supports various funding requirements, whether managing cash flow or investing in new equipment.

• More Flexibility: Loans can range from as little as £1,000 to as much as £2 million, catering to various types of SMEs.

• Less Restrictions: Even if your business has previously taken out pandemic-related loans, you can still apply for the GGS.

Key Takeaways

The Growth Guarantee Scheme provides an excellent opportunity for small businesses to secure the finance needed for growth. With Government backing, the GGS offers more favourable terms than many conventional loans.

If your company is planning to borrow, taking the time to explore the GGS is worthwhile. With our panel of trusted lenders, you can see how the GGS can support your business’s financial needs and ambitions for the future.

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