If you’re a UK business looking for a business loan or another form of finance to help with your growth plans, then the government-backed Growth Guarantee Scheme aims to improve the terms on offer to businesses needing to borrow funds.
What is the Growth Guarantee Scheme?
The Growth Guarantee Scheme is designed to support access to finance for smaller UK businesses as they look to invest and grow.
The scheme is operated by the government-backed British Business Bank and it was launched on 1 July 2024. It’s the successor to the Recovery Loan Scheme, which started in 2021 to help businesses recover from the COVID-19 pandemic.
How does the Growth Guarantee Scheme work?
The Growth Guarantee Scheme currently works with over 40 accredited lenders – the likes of Lloyds, HSBC, Santander, NatWest, Atom Bank and Funding Circle.
The different accredited lenders have a wide range of products they can offer businesses, including term loans, overdrafts, asset finance, invoice finance and asset-based lending.
The Growth Guarantee Scheme provides the lender with a 70% government-backed guarantee on the business finance it offers, up to a limit of £2 million (or £1 million if the business borrower falls within the scope of the Northern Ireland Protocol).
Businesses can use the borrowed finance for any legitimate business purpose – including managing cash flow and investment – although they must be able to demonstrate they can afford to take on the debt.
It’s worth noting that although the Growth Guarantee Scheme aims to improve the terms on offer to borrowers, if the accredited lender can offer a commercial loan (not one backed by the scheme) on better terms, then they will do so.
What are the key features of the Growth Guarantee Scheme?
If you’re thinking about applying for this scheme, here are some features to consider:
Borrow up to £2 million per business group: The maximum amount of finance that can be borrowed under the scheme is generally £2 million per business group (or £1 million for borrowers who fall under the scope of the Northern Ireland Protocol). Minimum loan sizes vary, starting at £1,000 for asset finance, invoice finance and asset-based lending, and £25,001 for term loans and overdrafts.
Wide range of products: The scheme supports term loans, overdrafts, asset finance, invoice finance and asset-based lending facilities (although not all accredited lenders will be able to offer all products).
Different term lengths: Term loans and asset finance facilities are available from 3 months up to 6 years, while overdrafts, invoice finance and asset-based lending are available from 3 months up to 3 years.
Pricing: Interest rates and fees charged by the lenders will vary and will depend on the specific lending proposal. The lender’s pricing will take into account the benefit of the government guarantee.
Personal guarantees: Personal guarantees can be taken at the lender’s discretion, in line with their normal commercial lending practices, although principal private residences cannot be used as security within the scheme.
Guarantee is to the lender: If the borrower defaults then the scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the loan or funding (after the lender has completed its normal recovery process). The borrower always remains 100% liable for the debt.
Decision-making is delegated to the lender: Scheme-backed financing is provided at the discretion of the lender. Lenders are required to undertake their standard credit and fraud checks for all applicants.
Is my business eligible for the Growth Guarantee Scheme?
To be eligible to apply for business finance under the Growth Guarantee Scheme, you must be a smaller business (or business group) with a turnover no greater than £45 million.
Your business needs to be UK-based and be generating 50% of its income from trading activity.
The lender will want to see you have a viable business proposition and that your business is not in any difficulty or involved in any insolvency proceedings.
Borrowers will also need to confirm that any funds they receive under the Growth Guarantee Scheme will mean they don’t exceed the maximum amount of any public subsidy they’re allowed to receive.
Businesses that previously took out a coronavirus-related business loan (a CBILS, CLBILS or BBLS loan), or a Recovery Loan Scheme loan before 30 June 2024, are not prevented from accessing the Growth Guarantee Scheme, but any borrowing under those previous schemes may reduce the maximum amount of funding the business can access through the Growth Guarantee Scheme.
How do I apply for the Growth Guarantee Scheme?
You need to look at the list of accredited lenders on the Growth Guarantee Scheme, and apply to them directly (usually online) for the type of business loan or other business financing that you’re after.
Remember that not every accredited lender on the list provides every type of finance, and the amount of finance offered will vary between lenders.
The lender will then make a decision on your application. If it can offer a commercial business loan on better terms than a scheme-backed one, then it will do so. If that’s not the case, and you’re eligible for support under the Growth Guarantee Scheme, a lender can use it to help offer you the finance you need.
If one lender turns you down, you can still approach other lenders on the scheme.
What are my other business loan options?
If your business is just starting out, you might want to consider another government-backed loans programme, called the Start Up Loans scheme, which is operated by the British Business Bank.
This type of loan is unsecured, there’s a fixed interest rate of 6% per annum, and the loan repayment term can be between 1 and 5 years. All owners or partners in a business can individually apply for up to £25,000 each, with a maximum of £100,000 available per business.
If you’re after a general non-government-backed business loan from a lender, then you can compare all your options in our guide to the best business loans.
Bottom line
If your business is looking for funds to finance its growth plans, then it’s worth looking at the Growth Guarantee Scheme and exploring whether you’re eligible. There are various types of business loans and finance options available from different lenders as part of this scheme.
Although this government-backed programme aims to improve the terms on offer to business borrowers, it’s still always worth checking whether you can get a better deal elsewhere
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Michelle Stevens is a deputy editor at Finder, specialising in banking, credit, loans and mortgages. She has a journalism degree from the University of Sheffield and has been a journalist for 15 years, writing on topics including fintech, payment systems and retail. In her spare time, Michelle likes to travel, explore new foodie experiences and attempt to improve her own culinary skills. See full bio
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