The Growth Guarantee Scheme (“GGS”) is the successor to the Recovery Loan Scheme, and is Government backed like its predecessor.
It is designed to support access to finance for UK smaller businesses for investment and growth purposes. The GGS launched with accredited lenders, a list of which can be found HERE, on 1 July 2024. With a wide range of products supported by different lenders, including term loans, overdrafts, asset finance, invoice finance and asset-based lending.
The GSS can generally support facility sizes of up to £2m and provides the lender with a 70% government-backed guarantee.
Businesses can use the finance for any legitimate business purpose, including managing cashflow and investment. However, businesses must be able to afford to take out additional debt finance for these purposes.
Key features include:
- Up to £2m per business group: The maximum amount of a facility provided under the scheme is generally £2m per business group. Minimum facility sizes vary, starting at £1,000 for asset finance, invoice finance and asset-based lending, and £25,001 for term loans and overdrafts.
- Wide range of products: GGS supports term loans, overdrafts, asset finance, invoice finance and asset-based lending facilities. Not all lenders will be able to offer all products;
- Term length: Term loans and asset finance facilities are available from three months up to six years, with overdrafts, invoice finance and asset-based lending available from three months up to three years;
- Access to multiple schemes: Businesses that took out a CBILS, Bounce Back Loan Scheme or a Recovery Loan Scheme facility before 30 June 2024 are not prevented from accessing GGS, but borrowing under these schemes may reduce the maximum amount the borrower is eligible for.
- Pricing: Interest rates and fees charged by lenders will vary and will depend on the specific lending proposal. The lender’s pricing will take into account the benefit of the Government guarantee;
- Personal Guarantees: 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;
- Guarantee is to the lender: The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it has completed its normal recovery process. The borrower always remains 100% liable for the debt;
- Decision-making delegated to the lender: GGS-backed facilities are provided at the discretion of the lender. Lenders are required to undertake their standard credit and fraud checks for all applicants.
The assistance provided through GGS, like many Government-backed business support activities, is regarded as a subsidy and is deemed to benefit the borrower. There is a limit to the amount of subsidy that may be received by a borrower, and its wider group, over any rolling three-year period. Any previous subsidy may reduce the amount a business can borrow.
Eligibility criteria include:
- Turnover limit: The scheme is open to smaller 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, for most businesses generating more than 50% of its income from trading activity;
- Viability test: The lender must consider that the borrower has a viable business proposition;
- Business in difficulty: The borrower must not be a business in difficulty, including not being in relevant insolvency proceedings;
- Subsidy limits: Borrowers will 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.
Anyone interested in learning more about the GGS, please do not hesitate to contact one of the team here at HK HQ.
