Growth Guarantee Scheme

The UK government has a history of implementing schemes designed to support businesses in accessing finance particularly during challenging economic periods or to stimulate growth. From the more recent pandemic related initiatives like the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) to the subsequent Recovery Loan Scheme (RLS), these programmes evolve to meet prevailing economic needs. The Growth Guarantee Scheme (GGS) is the latest iteration, building on previous experiences to continue facilitating lending to UK small and medium-sized enterprises (SMEs).

Understanding the Growth Guarantee Scheme

The Growth Guarantee Scheme (GGS) officially launched on 1 July 2024 as a successor to the Recovery Loan Scheme. Its core purpose is to support access to finance for UK businesses, enabling them to invest, grow and improve their financial position. The scheme achieves this by providing a government guarantee to lenders, which reduces the risk for them and encourages them to offer more favourable terms to businesses.

How the Loan is Set Up: Key Features

The GGS operates by offering a 70% government-backed guarantee on loans provided by accredited lenders. It’s important to understand that this guarantee is provided to the lender, not directly to the borrower. This means that while the government assumes a portion of the risk for the lender, the borrower remains 100% liable for the full debt.

The maximum amount a business group can currently borrow under the GGS is generally up to £2 million. For businesses operating within the scope of the Northern Ireland Protocol, the maximum is typically £1 million. The minimum facility sizes vary by product type, from around £1000.

Interest rates and fees are determined by the individual lenders and will vary based on the specific lending proposal. However, lenders are expected to factor in the benefit of the government guarantee when setting their terms. While personal guarantees can be taken by lenders in line with their normal commercial practices, a borrower’s primary residence cannot be taken as security under the scheme.

Government Involvement and Responsibilities

The Growth Guarantee Scheme is managed by the British Business Bank on behalf of, and with the financial backing of, the Secretary of State for Business & Trade. The government’s role is to provide the partial guarantee to the lenders, aiming to stimulate lending that might otherwise not occur or would be offered on less favourable terms due to perceived risk.

Responsibilities of the Lender:

• Lending Decision: The decision to lend under the GGS remains entirely at the discretion of the accredited lender. They conduct their standard credit and fraud checks for all applicants, just as they would for any other loan application.
• Pricing: Lenders determine the interest rates and fees taking into account the government guarantee and any associated scheme fees they incur. They are expected to pass on the economic benefit of the guarantee to the borrower.
• Due Diligence: Lenders are responsible for ensuring the business meets the eligibility criteria and has a viable business proposition.
• Reporting: Lenders report to the British Business Bank on the loans issued under the scheme.

Responsibilities of the Borrower:

• Full Liability for Debt: It is paramount for businesses to understand that despite the government guarantee to the lender, they remain 100% liable for the entire debt. The guarantee is a safety net for the lender, not a reduction in the borrower’s obligation.
• Repayment: Businesses are responsible for making all interest payments and loan repayments from the outset.
• Eligibility Confirmation: Borrowers must provide written confirmation that receiving a GGS facility will not cause their business to exceed any maximum subsidy limits. This is because the assistance provided through the GGS is considered a form of subsidy.
• Information Provision: Businesses must provide all necessary documentation, such as financial accounts, business plans and details of any previous subsidy awards to support their application.

Suitable Business Situations

The GGS is designed to be inclusive, supporting a wide range of SMEs across various sectors. It is open to sole traders, limited companies, partnerships and other legal entities carrying out trading activity in the UK.

The scheme is particularly suitable for:

• Businesses Seeking Growth and Investment: For companies looking to expand operations, invest in new equipment or technology, develop new products or improve their overall efficiency.
• Businesses Improving Cash Flow: It can help bridge temporary cash flow gaps, manage unexpected expenses or provide working capital.
• Businesses That May Struggle with Traditional Finance: The government guarantee can make lenders more willing to offer finance to businesses that might not otherwise meet standard lending criteria, perhaps due to a shorter trading history or a less-than-perfect credit score.
• Businesses That Previously Used COVID-19 Schemes: Businesses that accessed previous government-backed schemes like CBILS, BBLS or RLS before 30 June 2024 are generally not prevented from accessing the GGS, provided they meet the current eligibility criteria and subsidy limits.

To be eligible, a business typically needs to have a turnover of up to £45 million (on a group basis if applicable), be actively trading in the UK (with more than 50% of income from trading activity) and not be considered “in difficulty” or in insolvency proceedings.

The Growth Guarantee Scheme offers a valuable avenue for UK businesses to secure the financing they need to thrive. By understanding its structure, the roles of all parties involved, and the specific eligibility criteria, businesses can assess if this government-backed scheme is the right fit for their growth ambitions.