What is the Growth Guarantee Scheme?

Launched on 1st July 2024, the Growth Guarantee Scheme (GGS) is the successor of the Recovery Loan Scheme. Announced by the Chancellor in the 2024 Spring Budget, its sole purpose is to provide small and medium-sized businesses in the UK with the support they need to invest and grow. 

 

How does the Growth Guarantee Scheme work?

Unlike other forms of funding, you as a business don’t apply for the growth guarantee scheme yourself. It will be recommended if a lender decides your loan application isn’t strong enough to meet their usual lending criteria.

As well as covering loans, GGS will also cover asset finance and invoice financing. Loan terms extend up to:

  • Six years for loans and asset finance facilities
  • Three years for invoice finance facilities and overdrafts.

 

How much can I borrow under the Growth Guarantee Scheme?

Under the Growth Guarantee Scheme, a small business can borrow up to £2 million (per business) for various types of financing. This includes term loans, overdrafts, invoice finance and asset finance. The maximum borrowing limit remains the same as it was under the Recovery Loan Scheme for businesses in Great Britain. However, businesses within the Northern Ireland Protocol have a maximum limit of £1 million.

Businesses in Great Britain can apply for:

  • A loan amount or overdraft between £25,001 and £2 million
  • Invoice or asset finance between £1,000 and £2 million

Businesses within the Northern Ireland Protocol can apply for:

  • Loans or overdrafts between £25,001 and £1 million
  • Invoice or asset finance between £1,000 and £1 million

 

Which businesses are eligible for the Growth Guarantee Scheme?

To be eligible for the scheme, your business needs to be generating more than half of its turnover from trading activity. As defined by the government, this means “buying and selling goods with a view to making a profit or surplus”.  Eligible businesses for GGS include:

  • Sole traders
  • Limited partnerships
  • Limited liability partnerships
  • Corporations
  • Co-operatives and community benefit societies
  • Other legal entities conducting business activity in the UK through a business account

 

What is the eligibility criteria for the Growth Guarantee Scheme?

To qualify for the growth guarantee scheme, there are several requirements a small business owner must meet:

  1. Turnover Limit: Business who are eligible for GGS must have an annual turnover of no more than £45 million
  2. Trading in the UK: More than 50% of turnover from trading activity in the UK (unless a registered charity or further education establishment)
  3. Viability Test: The lender will make sure the borrower has a viable business proposition.
  4. Not Insolvent: Not in collective insolvency proceedings or facing other business difficulties
  5. Loan Usage: You must use the loan you receive for legitimate business purposes such as investment or working capital.

It’s important to note that lenders must perform credit and fraud checks. Personal guarantees may be required, although Principal Private Residences cannot be used as security. If a lender can offer finance on normal commercial terms without the scheme, it should do so.

Which businesses are not eligible for the Growth Guarantee Scheme?

There are several types of businesses that aren’t eligible for the Growth Guarantee Scheme. This includes:

  • Banks, building societies, insurers and reinsurers (excluding insurance brokers)
  • State-funded primary and secondary schools
  • Public sector bodies
  • Individuals (excluding sole traders or partners in a partnership)

 

Can sole traders apply for the Growth Guarantee Scheme?

Yes, sole traders can apply for the Growth Guarantee Scheme, as long as they meet the other eligibility criteria. The business needs to have been trading for a minimum of 2 years.

What are the interest rates?

Interest rates and fees for loans under the Growth Guarantee Scheme can vary based on loan details. Lenders must pass on any benefits from the guarantee to the business after covering their own costs.

What is the government guarantee?

If a business defaults on a loan under the Growth Guarantee Scheme, the lender can recover 70% of the outstanding loan value from the government. This guarantee encourages lenders to provide financing, whilst the borrower remains 100% liable for the debt.

What can Growth Guarantee Scheme funds be used for?

Businesses can use Growth Guarantee Scheme funds for any legitimate business purpose, such as:

  • Managing cashflow
  • Purchasing equipment
  • Covering one-off costs
  • Assisting with payroll
  • Investing in marketing
  • Growing the business

Can businesses apply if they have previously received a Recovery Loan, BBL, CBILS, or CLBILS?

Yes! Businesses can generally apply, but the total amount borrowed is capped at £2m in Great Britain and £1m in Northern Ireland, including any outstanding debt under CBILS or RLS. Refinancing existing loans under RLS or CBILS is allowed and considered a new application under GGS, subject to meeting eligibility criteria.

Can businesses with bad credit apply?

Businesses with bad credit have limited options under GGS and could face higher interest rates. However, businesses previously refused credit may still qualify as lenders review each application on a case-by-case basis.

Will I need a credit check to apply?

Yes, lenders will conduct a credit check and possibly a fraud check. The type of checks may vary between lenders.

Tips for applying for the Growth Guarantee Scheme

  • Clearly outline the purpose of the loan in your business plan.
  • Prepare necessary documentation, including management accounts, financial accounts, and information about your business assets.
  • Consider applying through PMD Business Finance to identify suitable borrowing options and lenders.
  • Include fees and interest in your financial forecasts.
  • Make sure the financing term matches your cash-flow needs.
  • Don’t borrow more than you can afford to repay.
  • Apply for the appropriate financing from the right lender.
  • Secure the most competitive rates by applying through PMD Business Finance rather than multiple direct applications.

It’s worth remembering that whilst it’s guaranteed by the government, this money is still a loan. We’ll work with you to ensure that you can meet the monthly payments and ultimately pay-back the loan.

How do I apply for the Growth Guarantee Scheme?

PMD have experience with government-backed finance. We’ll research the market to find the best lender with the best deal for your business requirements. You can apply online via our simple application process. Alternatively, if you’d prefer to speak directly with our team, you can contact us on 0161 633 2548 or email info@pmdbusinessfinance.co.uk. We’ll guide you through the process and keep you updated every step of the way! We’re also experienced with other government schemes and incentives such as full expensing.

What types of business financing can PMD offer?

From an unsecured business loan and cash advances to equipment financing and invoice factoring, PMD can secure a range of finance facilities with access to the most competitive loan rates on the market. Our range of financing options enable business owners to open up multiple lines of credit, meaning you can borrow the funding you require to achieve your business goals and grow without limits.

Our services include, but aren’t limited to:

  1. Asset Finance: Enabling you to purchase much-needed tech, equipment, machinery and vehicles without having to pay it all upfront. Instead, you pay for the assets in smaller, more affordable monthly payments.
  2. Asset Refinance: Allowing you to unlock the equity tied up in your unencumbered business assets. It can also be used for debt consolidation.
  3. Invoice Finance: Bridges the gap between the point at which you make a sale and the time it takes for payment to be received from the debtor, allowing you to gain access to your cash immediately.
  4. Property Finance: We offer commercial mortgages, bridging and development loans and equity release; all of which we can guide you through.
  5. Structured Finance: Our in-house team of specialists can secure funding for business acquisitions, management buy-outs and buy-ins, restructuring debt and growth capital.
  6. Business Loans: Allows you to borrow a sum of money to use within your business, which is then repaid with interest over a set period.
  7. Merchant Cash Advance: Advance a lump sum of capital that you then pay back through your card sales.

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