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Finance
April 25, 2024
5 mins

What is the Growth Guarantee Scheme?

Key take away points:

  • What is the Growth Guarantee Scheme?
  • How could it help your business to grow?
  • Which businesses are eligible?
  • Key features and considerations
  • How to apply

The Growth Guarantee Scheme is intended to help small and medium-sized businesses to access the finance they need to grow. It will replace the government’s Recovery Loan Scheme (RLS) from July 1st 2024.

Read on to discover how the Growth Guarantee Scheme works and how it could support your business’ investment plans, or contact our team to discuss how it could support your growth.

 

Why has the Growth Guarantee Scheme been introduced?

The Growth Guarantee Scheme is the new name for the government’s Recovery Loan Scheme (RLS) and will come into effect from July 2024.

The RLS was introduced in April 2021 to help UK businesses to recover from the impact of the pandemic. In his April 2024 Spring Budget, Chancellor Jeremy Hunt said that he would provide £200m of funding to extend the scheme and it would help 11,000 SMEs access the finance they need.

Although the government is not ending the RLS scheme and the terms of it remain the same, they have decided to change the name to the Growth Guarantee Scheme.

 

How does the Growth Guarantee Scheme help UK businesses?

The Growth Guarantee Scheme offers a 70% Government-backed guarantee on finance taken out by SMEs. SMEs can access up to £2 million in finance in Great Britain, and up to £1 million in Northern Ireland. 

The scheme helps UK businesses to access the financing they need. This might include working capital or investment to stabilise their operations or invest in growth opportunities.

 

Which types of finance are backed by the Growth Guarantee Scheme?

The scheme will cover lenders offering loans, asset finance and invoice finance in amounts up to £2m. There are approximately 60 lenders eligible to lend under RLS so the expectation is that most/all of these will continue lend under the Growth Guarantee Scheme.

Minimum facility sizes vary from £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts.

 

When will the Growth Guarantee Scheme end?

The scheme is due to end in March 2026, but the RLS was extended multiple times, so it may continue for longer.

 

Does the Growth Guarantee Scheme provide lower interest rates?

Interest rates and fees charged by lenders will vary depending on the specific application.

Interest rates under the Growth Guarantee Scheme are not necessarily lower than a lender’s usual interest rates. In fact, in some cases, they can be higher, which is why it is important to consider multiple finance options to ensure you are entering an appropriate and affordable agreement.

 

Are PGs required under the Growth Guarantee Scheme?

Personal guarantees can be taken at the lender’s discretion (in line with their normal commercial lending practices). Principal Private Residences cannot be taken as security within the scheme.

The Growth Guarantee Scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it’s completed its normal recovery process.

 

Which businesses are eligible for the Growth Guarantee Scheme?

The scheme is open to businesses that are carrying out trading activity in the UK with a turnover of up to £45m, including:

  • Sole traders
  • Corporations
  • Limited partnerships
  • Limited Liability Partnerships (LLP)
  • Co-operatives and community benefit societies
  • Any other legal entity carrying out business activity in the UK.

Banks, building societies, insurance companies, public-sector bodies and state funded primary and secondary schools are not eligible.

The business must not be in difficulty (including not being in relevant insolvency proceedings).

In most cases there is no requirement for businesses to confirm they have been affected by Covid-19.

The lender must assess whether the business has a viable business proposition (but it may disregard any concerns over short-to-medium term business performance due to the impact of Covid-19).

 

How to apply for the Growth Guarantee Scheme

It is not possible to apply directly to the Growth Guarantee Scheme. Instead, when you are applying for finance, the lender will have the option to use the scheme to provide them with additional security, strengthening your application and increasing the likelihood you will be able to secure finance.

For example, if a business’ finance application does not meet their typical lending criteria the lender may choose to accept the application under the Growth Guarantee Scheme, so they have the added security that 70% of the finance is government backed.

It is important to note that while the government provides backing for 70% of the finance, your business will be legally responsible for making all repayments for the full value and term of the finance agreement.

 

Making the right decision for your business

As an ethical and FCA-regulated commercial finance intermediary, we are committed to ensuring that our clients make informed financial decisions; to do this we need to understand your business and what you are looking to achieve in both the short and long term.

If you are interested in affordable finance solutions that enable growth and bring stability, whether backed by the Growth Guarantee Scheme or not, our team is here to guide you through your options.

BS.202402.01BL83

 

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