The Government Backed Guarantee Loan Scheme
20 June 2024
Share
Your Guide to the Government Guarantee Scheme for Business Growth
The Government Guarantee Scheme for Business Growth offers a valuable opportunity for businesses to access the funding they need to thrive and expand. By understanding the eligibility criteria, application process, and benefits of the scheme, businesses can make informed decisions about their financing options. It's essential to carefully consider the terms and conditions of the scheme and seek guidance from financial professionals to ensure the best outcomes for your business.
To learn what funding options may be available to your business, go to Foundy.com/fundraising to access one of the largest networks of lenders involved in the government-backed growth scheme. With the right approach and support, the Government Guarantee Scheme can be a powerful tool for businesses looking to secure the funding they need to achieve their growth ambitions and contribute to the overall economic recovery.
Announcement Details
The UK government has announced the launch of the Growth Guarantee Scheme, a new initiative designed to support access to finance for smaller businesses as they look to invest and grow. The scheme, which is set to launch on 1 July 2024, will succeed the Recovery Loan Scheme and provide a 70% government-backed guarantee to lenders on finance of up to £2 million [1]
What is the Growth Guarantee Scheme?
The Growth Guarantee Scheme is a government-backed program that aims to make it easier for UK small and medium-sized enterprises (SMEs) to secure the loans they need to thrive and expand. By providing a 70% guarantee to lenders, the scheme reduces the risk for lenders and encourages them to approve loan requests from businesses that may not have perfect credit or substantial collateral [2]][4].
The scheme is expected to support around 11,000 businesses between 1 July 2024 and 31 March 2026 (1). t will be administered by the British Business Bank on behalf of the Secretary of State for Business and Trade1
Official announcement date
The Growth Guarantee Scheme was unveiled by the Chancellor of the Exchequer in the Spring 2024 Budget and is set to officially launch on 1 July 2024 [2The scheme will run until 31 March 2026 [2].
Key features of the loan scheme
The Growth Guarantee Scheme will offer a wide range of products supported by different lenders, including term loans, overdrafts, asset finance, invoice finance, and asset-based lending[1]] The terms of the scheme are intended to remain broadly unchanged from the Recovery Loan Scheme, ensuring continuity and consistency for lenders and the business community[[1]
Businesses in Great Britain can access loans or overdrafts between £25,001 and £2 million, and invoice or asset finance between £1,000 and £2 million [2]. For businesses inside the scope of the Northern Ireland Protocol, the maximum facility size is £1 million [2] [2].
The annual effective rate of interest and upfront and other fees cannot exceed 14.99%, according to the British Business Bank [2].
Eligibility and Application Process
To qualify for the Growth Guarantee Scheme (GGS), small and medium-sized enterprises (SMEs) in the UK must meet specific requirements designed to ensure that the scheme's benefits reach the intended recipients efficiently and effectively. The eligibility criteria are as follows:
UK Based: SMEs must operate and conduct business within the United Kingdom.
Turnover Threshold: Businesses must have an annual turnover of up to £45 million [4].
Source of Turnover: More than 50% of the turnover must come from trading activities [4].
Insolvency Proceedings: SMEs currently involved in insolvency proceedings are not eligible for the scheme [4].
Foundy has more than 1000 lenders embedded into its advanced fundraising platform. Head through the quick questionnaire process to explore which lenders may suit your use case. From your personalised dashboard, you should see a tailored list of options. After completing your questionnaire, a fundraising specialist will contact you to discuss your options to help secure the best proposal.
Who is eligible for the Growth Guarantee Scheme?
The following types of businesses are eligible for GGS [2]:
Sole traders
Limited partnerships
Limited liability partnerships
Corporations
Co-operatives and community benefit societies
Other legal entities that carry out business activities in the UK
As long as a business satisfies the other eligibility criteria, GGS is open to [2]:
Businesses that have previously received support through schemes such as the Recovery Loan Scheme (RLS), Coronavirus Business Interruption Loan Scheme (CBILS), or Bounce Back Loan Scheme (BBLS)
Businesses with bad credit, although they may have fewer options available and typically face higher interest rates
Which businesses aren't eligible for the Growth Guarantee Scheme?
While the Growth Guarantee Scheme is widely available to UK businesses, there are some exceptions. The following are not eligible [5]:
Banks
Insurance companies
State-funded schools
Public sector bodies
It's not available to individuals, either, excluding those who are sole traders or partners acting on behalf of a partnership [5].
Why has the government extended and renamed the Recovery Loan Scheme?
The government has designated 2024 the Year of the SME. This is an acknowledgement of the fact that 99% of UK businesses are SMEs, and they support 27 million jobs and contribute £4.5tn to the UK economy [5].
The Growth Guarantee Scheme aims to provide an essential lifeline to SMEs up and down the country who are struggling against the continuing economic headwinds [5]. The scheme is expected to support around 11,000 businesses between 1 July 2024 and 31 March 2026 [1].
Foundy can assist you in the fundraising process
Steps to apply for the loan via Foundy.com/fundraising
Do Your Homework: Before diving in, make sure you fully understand the scheme. The more you know, the smoother the process will be [4].
Find Your Guide: Think of a broker as your personal navigator through the world of government-backed loans. A good broker knows all the ins and outs of the GGS and can help you find the best lender, get your paperwork in order, and make your life easier [4].
Show Them What You've Got: Your loan application is your chance to shine. With your broker's help, you'll put together a package that tells lenders why your business is a good investment. This includes your business plan, financial forecasts, and how the loan will help you grow and create jobs [4].
Get The Green Light: If everything looks good, the lender will approve your loan. The GGS launches officially on July 1st, 2024, so you can start planning now to get ahead of the curve and make the most of this opportunity as soon as possible [4].
Foundy can assist you in the fundraising process
Explore Foundy today to take advantage of our comprehensive resources and expert guidance in the M&A landscape. If you are fundraising, check out our advanced platform for capital raising. We have over 1000 lenders embedded into the tool.
Foundy additionally offers specialised M&A advisory services across a wide variety of industries. If you're in the process of growing your business towards a funding round or an acquisition, clients have repeatedly recommended utilising a portal. It starts with a free business valuation. This will help you and our M&A advisors understand your company's current position and the necessary steps to position yourself for a successful sale. Foundy factors in over 29 key elements that contribute to your business valuation, ensuring a comprehensive and accurate assessment.
Similarly, if you're a buyer, Foundy's M&A advisors can help you find your next acquisition and streamline your end to end process via an all in one portal.
Ready to discover your business's value?
Running a business and deciding to sell or acquire another can feel like having two full-time jobs. While some business owners thrive on the excitement of buying and selling on their own, many, including myself, benefit from collaborating with experts who bring more sector specific experience. However, it’s important to note that working with M&A advisors is not a one-size-fits-all solution. Hence why we built our advanced portal and Find An Advisor programme to empower you with the tools, education and relevant expert support to help you navigate the end-to-end process and secure a higher valuation.
Check out the free calculator on our pricing page, which shows you the six to seven figures in additional share value Foundy can provide your business.
No matter where you are on your business journey, connect with Foundy to access the resources needed for a smoother acquisition or sale process.
FAQs
What is the Growth Guarantee Scheme?
The Growth Guarantee Scheme is a program where the government offers a 70% guarantee to lenders providing loans up to £2 million in Great Britain and £1 million in Northern Ireland. This initiative aims to enhance access to finance for small and medium-sized enterprises (SMEs) and is expected to assist approximately 11,000 businesses from 1st July 2024 to 31st March 2026.
What does the GGS scheme entail?
The GGS (Growth Guarantee Scheme) involves the government providing a 70% guarantee on loans issued by participating lenders to SMEs. This guarantee is designed to reduce the risk for lenders, thereby encouraging them to offer loans to SMEs that might not qualify under standard lending criteria.
How does the UK Guarantee Scheme work?
The UK Guarantee Scheme involves a commitment by the government to unconditionally and irrevocably ensure the payment of guaranteed amounts without the need for any legal actions, demands, or exhaustion of other judicial remedies against the company.
How is the funding for growth supported?
The funding for growth is primarily supported by the government, which covers 90% of the costs. Each participant is required to pay £750, with the government funding the remaining amount.
Foundy has more than 1000 lenders embedded into its advanced fundraising platform. Head through the quick questionnaire process to explore which lenders may suit your use case.
References
[1] - https://www.british-business-bank.co.uk/finance-options/debt-finance/growth-guarantee-scheme
[2] - https://swoopfunding.com/uk/government-support/growth-guarantee-scheme/
[3] - https://businessfinance-v4b.com/growth-guarantee-scheme-what-you-need-to-know/
[4] - https://adeptbf.co.uk/government-backed-loans/growth-guarantee-scheme/
[5] - https://www.sage.com/en-gb/blog/growth-guarantee-scheme-new-recovery-loan-scheme/
Disclaimer
Please note that this information is not financial or legal advice. Always seek professional advice before making any financial decisions relating to business acquisitions.