Growth Guarantee Scheme, successor to Recovery Loan Scheme, launches to help small businesses access finance

The Growth Guarantee Scheme UK is a government-backed initiative designed to help around 11,000 smaller businesses access essential finance for investment and growth.

Created as a successor to the Recovery Loan Scheme originally set up in 2021, the Growth Guarantee Scheme lets small businesses secure funding with a government growth guarantee scheme that covers up to 70% of the loan amount.

The scheme was announced in this year's Spring Budget by former chancellor Jeremy Hunt. It runs until 31 March 2026 and provides a 70% government-backed guarantee. The borrower always remains 100% liable for the debt.

More than 40 lenders have been accredited for the scheme. As of 8 July, 20 lenders are open for applications.

What is the Growth Guarantee Scheme?

Backed by the government, the Growth Guarantee Scheme is designed to provide financial support to businesses that want to expand.

Under the scheme, small and medium-sized businesses can access loans with less risk, as the government guarantees part of the loan amount. This helps alleviate lenders' concerns about businesses failing to pay back what they've borrowed.

With the money, businesses can scale up their operations, invest in technology or enter new markets. By providing access to affordable credit, the scheme aims to stimulate economic growth, create jobs and bring about innovation across different industries.

Terms of the Growth Guarantee Scheme

• Up to £2 million per business group: The minimum and maximum amount of the facility varies according to the business's circumstances and the type of facility.

  Maximum facility sizes are up to £2 million per business. Minimum facility sizes start at £1,000 for asset finance, invoice finance and asset-based lending, and £25,001 for term loans and overdrafts.

• Range of products: The Growth Guarantee Scheme 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 a number of schemes: Businesses that borrowed through the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) or Recovery Loan Scheme (RLS) before 30 June 2024 are not prevented from accessing the Growth Guarantee Scheme. 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: Facilities backed by the Growth Guarantee Scheme are provided at the lender's discretion. Lenders must undertake their standard credit and fraud checks for all applicants.

Who can apply for the Growth Guarantee Scheme?

The Growth Guarantee Scheme is open to small and medium-sized businesses and start-ups that demonstrate potential for growth but face challenges in securing traditional financing.

Eligibility criteria may vary depending on the lender, but generally includes the following:

• Turnover limit: The scheme is open to smaller businesses with a turnover of up to £45 million (on a group basis, where part of a group).

• UK-based: The borrower must be trading 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 going through insolvency proceedings.

• Subsidy limits: Borrowers will need to provide written confirmation that receiving a loan from the scheme won't mean they exceed the maximum amount of subsidy they're allowed to receive.

  All borrowers that receive a subsidy from a publicly funded programme should be provided with a written statement, confirming the level and type of aid received.

Benefits of the Growth Guarantee Scheme for small businesses in the UK

The Growth Guarantee Scheme offers significant advantages to small businesses in the UK.

• Easier access to financing: Even if you have a limited credit history or little collateral to offer as security.

• Secure loans at competitive interest rates: There's less risk for lenders, meaning you have more freedom to invest in growth initiatives such as hiring staff, upgrading technology or expanding operations.

• Boosts confidence among entrepreneurs: Business owners like you feel more encouraged to innovate and take risks, while supporting the broader economic goals of job creation and regional development across the UK.

How to access the Growth Guarantee Scheme

Funding from the Growth Guarantee Scheme is available through the British Business Bank's accredited lenders. They range from high street and challenger banks to asset-based and specialist local lenders.

You make an application through an accredited lender via the British Business Bank website. When you apply, the lender will decide whether your business is eligible and whether this type of funding is suitable for you.

Accredited lenders should only offer finance through the scheme if they're unable to offer a facility on equivalent terms without the guarantee.

Note: Some lenders that offered facilities under the Recovery Loan Scheme between 6 April 2021 and 30 June 2024 may not be accredited to offer funding through the Growth Guarantee Scheme.

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