Growth Guarantee Scheme
The Growth Guarantee Scheme is the successor to the Recovery Loan Scheme.
As with the Recovery Loan Scheme, it is designed to support eligible UK small and medium-sized businesses to access finance to invest and grow.
The Growth Guarantee Scheme can support facility sizes of up to £2m and provides the lender with a 70% government-backed guarantee. It should be noted that the guarantee is to the Lender and not the Borrower, who always remains liable for the full amount of outstanding debt taken out. The main benefit to the Borrower is that the Growth Guarantee Scheme will provide the Lender with added security and allow them to lend where they may not have been able to without the Government guarantee.
Businesses can use finance for any legitimate business purpose – including managing cash flow and investment. However, Lenders make decisions to lend based on their own lending criteria and businesses must be able to afford and service the debt finance taken.
What is the Growth Guarantee Scheme
As part of HM Treasury’s efforts to Build Back Better, the British Business Bank has again been tasked with sustaining the roll-out of critical business funding. The consolidation of existing loan arrangements into a single Growth Guarantee Scheme (GGS) signals a desire to release many enterprises from long-term state dependency. The previous schemes had defined criteria around the size of the business applying, along with different amounts of borrowing available depending on its scale. The GGS will be a single offering for businesses of all sizes and life stages.
The new scheme will support borrowing of up to £10 million for individual businesses, and up to £30 million across a group, and can be used for business purposes including managing cash flow, investment, and growth. It is designed to appeal to businesses that can afford to take out additional finance, providing them with continued support as they steer a path towards a sustainable recovery. Like the Recovery Loan Scheme and the CBILS Scheme before this borrowers – borrowers can choose from term loans, overdrafts, asset finance, and invoice finance, and we expect there will be a large number of participating lenders.
Amalgamating the four COVID loan initiatives into a single scheme
Key features
The Growth Guarantee Scheme aims to improve the terms on offer to borrowers. If a lender
can offer a commercial loan on better terms, they will do so.
Up to £2m per business group
Wide range of products
Term length
Access to multiple schemes
Pricing
Personal Guarantees
Interest and fees to be paid by the business from the outset
Who is eligible?
The Growth Guarantee Scheme is intended to aid the recovery and growth of UK businesses, across all sectors and allow them to continue to invest in their future growth and prosperity.
It has to be expected that the pandemic and measures taken by the Government will have had a negative impact on businesses. It is anticipated that where poorer financial performance is due to Covid-19 that accredited lenders will overlook what might otherwise be normal concerns about the short to medium-term performance of the applying business.
But it is inevitable that the approach taken by accredited lenders will vary subject to their respective credit policies and criteria. The new scheme will almost certainly provide accredited lenders enough flexibility to impose their own requirements, particularly as they aim to mitigate and balance risk across their portfolios.
Eligibility Criteria Include
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- Turnover limit: The scheme is open to small and medium sized businesses with a turnover of up to £45m (on a group basis, where part of a group).
- UK-based: The borrower must be carrying out trading activity in the UK and more than 50% of its income from trading activity.
- Business in difficulty: The borrower must not be a business in difficulty, this includes not being in relevant insolvency proceedings.
Looking for a Growth Guarantee Scheme facility?
As with the RLS scheme, Growth Guarantee Scheme lending will be provided by accredited lenders and will encompass loans, asset finance invoice finance, overdraft, and property lending.
If you are looking to take out a loan using the Growth Guarantee Scheme and need some advice, please don’t hesitate to contact us.
