The Growth Guarantee Scheme is basically a scheme to support small and medium-sized enterprises in the UK by easier access to finance. The GGS came as the successor of the Recovery Loan Scheme, designed to help businesses invest and grow by providing government-backed guarantees on loans. In this blog, we will explore what the Growth Guarantee Scheme is, how it works, eligibility criteria, the application procedure, and benefits it provides.
What is the Growth Guarantee Scheme?
The Growth Guarantee Scheme is a government initiative aimed at facilitating access to finance for smaller UK businesses. It was introduced on 1 July 2024, following the end of the Recovery Loan Scheme. Administered by the British Business Bank on behalf of the Secretary of State for Business and Trade, the GGS supports a wide range of financial products including term loans, overdrafts, asset finance, invoice finance, and asset-based lending. The scheme provides lenders with a 70% government-backed guarantee, encouraging them to lend to businesses that might otherwise struggle to secure financing.
Key Features of the Growth Guarantee Scheme
- Loan Amounts: The GGS can generally support facility sizes of up to £2 million for businesses operating outside the scope of the Northern Ireland Protocol. For businesses within the Northern Ireland Protocol, the maximum amount is £1 million. This ensures substantial support for businesses looking to invest and grow.
- Types of Finance: The scheme supports various financial products, such as term loans, overdrafts, asset finance, invoice finance, and asset-based lending. This variety allows businesses to choose the type of financing that best suits their needs.
- Government Guarantee: The GGS provides a 70% government-backed guarantee to the lender, reducing their risk and encouraging them to offer loans to smaller businesses.
- Term Lengths: The terms for different types of finance vary. Term loans and asset finance facilities are available for periods ranging from three months to six years. Overdrafts, invoice finance, and asset-based lending are available for terms between three months and three years.
Eligibility Criteria
To qualify for the Growth Guarantee Scheme, businesses must meet certain criteria:
- Business Size and Turnover: Eligible businesses must have an annual turnover of less than £45 million. This ensures that the scheme targets smaller enterprises that need the most support.
- Trading History: Businesses must have been trading for at least two years in the UK. This criterion helps ensure that the business has a proven track record.
- Viability: Applicants must demonstrate financial viability and should not be in insolvency proceedings. Lenders will assess the business’s ability to repay the loan based on their standard credit assessment processes.
- Usage of Funds: The funds obtained through GGS must be used for legitimate business purposes, such as managing cash flow, investing in new equipment, or expanding operations.
How to Apply for the Growth Guarantee Scheme
- Assess Your Eligibility: Start by checking if your business meets the basic eligibility criteria, such as turnover, trading history, and financial viability.
- Prepare Necessary Documentation: Gather all required documents, including financial statements, a business plan, and details of existing loans. Having these documents ready will streamline the application process.
- Research and Select a Lender: Compare offers from accredited lenders to find the best terms. It’s important to consider factors such as interest rates, fees, and the types of financing available.
- Submit Your Application: Apply through the chosen lender’s application process. Ensure that all information provided is accurate and complete to avoid delays.
- Review and Accept Terms: Carefully review the loan offer, including the terms and conditions, before accepting. Make sure you understand the repayment schedule and any associated fees.
Benefits of the Growth Guarantee Scheme
- Improved Access to Finance: The government guarantee reduces the risk for lenders, making them more willing to approve loans. This increased access to finance can be critical for smaller businesses.
- Favourable Loan Terms: Businesses can potentially secure lower interest rates and better repayment terms compared to conventional loans, reducing overall borrowing costs.
- Support for Growth and Expansion: The scheme enables businesses to invest in new opportunities, expand operations, and improve infrastructure without the strain of large upfront costs.
- Flexibility in Use of Funds: The funds obtained through GGS can be used for a wide range of business activities, from purchasing equipment to managing operational expenses.
The Growth Guarantee Scheme offers numerous benefits to UK smaller businesses by improving access to finance and providing favourable loan terms. By understanding the steps involved in applying and the potential advantages, businesses can make informed decisions that support their growth and financial health.
If you’re considering the Growth Guarantee Scheme for your business or looking for business finance solutions in the UK, contact us today for personalised advice. Empower your business with the financial support it needs to thrive.
