Growth Guarantee Scheme (GGS)

The COVID-19 Pandemic created incredibly uncertain times for businesses in the UK and the wider world, and many companies suffered serious unrecoverable financial hits; the number of British-based private sector businesses fell by 389,600 in 2020 alone.

The British Business Bank formed a scheme to support UK businesses in the aftermath of the Pandemic, called the “Recovery Loan Scheme”, and on the 1st of July, 2024 this was reformed as the “Growth Guarantee Scheme”. Today, we’ll be looking at what the Growth Guarantee Scheme is, how your business can access it, and what the benefits of the GGS are for you and your business.

Contents:

• Understanding the Growth Guarantee Scheme
• The Impact of the GGS on UK Businesses
• Challenges and Considerations
• What Are the Interest Rates for the GGS?
• Why Should You Apply for the GGS?
• Tips for Applying for the GGS
• FAQs

Understanding the Growth Guarantee Scheme

The Growth Guarantee Scheme, known simply as “GGS” for short, is designed to support smaller businesses in the UK in accessing finance solutions that allow them to invest and grow. Accredited lenders, through the scheme, support a wide range of services for eligible businesses, such as overdrafts, term loans, asset finance, invoice finance and asset-based lending, offering more favourable terms to borrowers.

Key Features of the GGS

Several key features of this scheme are important for businesses to know before they borrow, such as:

• The maximum amount of facility that can be borrowed under the scheme is £2 million (borrowers in Northern Ireland may borrow up to £1 million).
• The scheme offers a government guarantee of up to 70% on loans provided by participating lenders, but the borrower always remains 100% liable for the debt.
• Facilities backed under the GGS are provided at the discretion of each lender, who is required to undertake standard fraud and credit checks for each applicant.
• Interest rates and fees set by lenders will vary based on the specific loan proposal. Lender pricing will reflect the advantage provided by the government guarantee.
• The term loan facilities are available from three months to six years, giving the borrower flexibility for repayment.
• The scheme supports a wide range of finance services, from invoice finance to asset-based lending, although not all lenders can provide these.

It is important to note that businesses that took out a Recovery Loan Scheme (RLS), Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), or a Coronavirus Large Business Interruption Loan Scheme (CLBILS) before the 30th of June 2024 may use the Growth Guarantee Scheme, but the maximum amount that can be borrowed may be affected.

Eligibility Criteria of the GGS

The GGS is designed to be inclusive, targeting a wide range of small and medium-sized enterprises (SMEs) across various sectors, such as sole traders, limited partnerships and corporations. The eligibility criteria include:

• The scheme has a turnover limit of up to £45 million.
• The business must be carrying out any trading activities in the UK.
• The business must generate more than 50% of its income from trading activities.
• The business must have been trading for at least 2 years (within the UK).
• The lender must consider that the borrower has a viable business proposition.
• The borrower must not be a business in difficulty, including not being in relevant insolvency proceedings.
• Borrowers need to provide written confirmation that receipt of the GGS facility will not mean that the business exceeds the maximum amount of subsidy they are allowed to receive.
• The borrower must not be any of the following; banks, building societies, insurers, reinsurers (excluding insurance brokers), public sector bodies, and state-funded primary and secondary schools.

The Impact of the GGS on UK Businesses

Since its introduction, the Growth Guarantee Scheme has had a profound impact; between its creation in July 2024, to March 2026, it is expected to support around 11,000 smaller businesses in the UK. By lowering the barriers to financial support, the GGS has enabled SMEs to pursue ambitious growth strategies that they may not have been able to reach without this easier access to funding.

Businesses in high-growth sectors such as technology, manufacturing, and green energy have particularly benefited since access to funding is critical for scaling operations. For example, a technology startup that might have struggled to secure a loan due to a lack of tangible assets can now access the capital it needs to develop new products or expand into new markets. Similarly, a manufacturing company looking to invest in new machinery or expand its production capacity can do so with the confidence that asset financing is available under favourable terms.

Challenges and Considerations

While the GGS has been widely praised for its positive impact, it is not without challenges. One concern is that the scheme may encourage excessive borrowing, leading to potential financial strain for businesses in the long term. To mitigate this risk, it is crucial for businesses to carefully assess their need for financial support and ensure that they have a robust plan for loan repayment.

Another consideration is the need for greater awareness and understanding of the scheme among SMEs; despite the benefits of the GGS, some businesses remain unaware of the opportunities it presents. Increasing outreach and education efforts could help more SMEs take advantage of the scheme, which in turn can improve the performance of UK businesses considerably.

What Are the Interest Rates for the GGS?

The interest rate and associated fees vary for each lender, and the lending proposal outlined will affect what interest and fees are added. However, lenders must pass the economic benefits of the guarantee to your business, after factoring in their costs for using the scheme, such as the required scheme lender fee. Under the GGS, the lender’s upfront fees are limited to a maximum of 5%, including broker fees.

Why Should You Apply for the GGS?

• Gain quick access to necessary funds (up to £2 million) that can help your business reach the next level; no more waiting around for decisions.
• The scheme is designed to help businesses like yours, giving the lender a 70% guarantee (which leads to more favourable terms).
• All lenders are UK-based, meaning they are well-informed about the current market conditions.
• Funds acquired through the scheme can be used for a wide range of business purposes, such as for equipment, property, cash flow management, or investment opportunities.

Tips for Applying for the GGS

If you’re considering applying for this scheme, keep these tips in mind for a more successful process:

• Understand the Eligibility Criteria: Ensure that your business meets the basic requirements of the scheme, such as having over 2 years of trading history.
• Prepare a Strong Business Plan: Lenders will want to see your business plan, so highlight your projected financials and how the loan will support your objectives.
• Determine the Right Financing Option: There are various funding options available through the scheme, so it is important to select the type that best suits your needs.
• Calculate Your Funding Needs: To avoid borrowing more than you need, determine exactly how much funding you require - does this align with your growth plan?
• Consult with Financial Advisors: Seek advice from financial advisors or business mentors to strengthen your application and choose the best lender.
• Compare Lender Terms: Each lender will likely have varying lending terms under the GGS, so it is important to compare interest rates, repayment terms, and additional fees.
• Gather Necessary Paperwork: Collect and present necessary documents such as financial accounts, management accounts, and business asset information.
• Prepare for Repayment: Will your projected business cash flow support repayment? Remember, a well-planned repayment strategy will strengthen your application.

How Do I Apply?

Applying for funding through the GGS scheme is simple - we do the legwork for you! All you have to do is get in touch with us, and we will advise you on the most suitable finance options based on your specific needs. Once you’ve decided on the amount you require, and the type of financial support you’d prefer, our brokers will get to work to find the most favourable terms.

We understand that sometimes, your business will need access to funding faster than usual - at Union Business Finance, our loans are typically available to you in just 48 hours. If you need any further information about our finance solutions, please contact us to discuss this with our knowledgeable brokers.

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FAQs

• Can a business with a poor credit score apply?

  Businesses with poor credit scores can still apply for the GGS, but their terms may be more unfavourable, and they may face fewer financial options. As with any loan scheme, look to improve your business credit score as soon as possible.

• Am I eligible if I have received EIS?
  Yes, businesses that have received funding from the Enterprise Investment Scheme (EIS) are eligible to apply for funding through the GGS scheme, as long as all other criteria are satisfied.
• Can I use the GGS to refinance existing debt?
  Under certain circumstances, existing debt can be refinanced through the GGS. One such circumstance includes if your business is looking to improve its working capital position, which includes the repayment of debt - the GGS would be appropriate to assist in doing so. Alternatively, the scheme can also be used to refinance an existing RLS, BBLS or CBILS facility, where the total financing requirements (including any increase) exceed the minimum facility sizes offered under the GGS.
• Can I make additional repayments to my loan?
  Additional repayments can be made with no Early Redemption Charge if you decide to repay a loan early, either in full or in part.