The Recovery Loan Scheme, set to end in June 2024, will be extended and renamed the Growth Guarantee Scheme, maintaining its terms to ensure stability for lenders and businesses. Lenders will offer a 70% guarantee on finance up to £2 million for smaller businesses, aiming to support around 11,000 businesses from July 1, 2024, to March 31, 2026.
The first two phases, designed to aid UK businesses post-Covid-19, provided £4.3 billion in financing, and since August 2022, the third phase has disbursed over £1 billion, with 80% of facilities outside London and over 90% supporting businesses with fewer than 50 employees.
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How does the Growth Guarantee Scheme work?
Businesses can directly apply for lending under GGS through various accredited lenders or with the assistance of a broker like Approved Finance.
Our team can provide insights into whether applying for lending through the Growth Guarantee Scheme might enhance your chances of success. It's important to note that the scheme is designed to support businesses that may not meet a lender’s typical lending criteria.
Similar to the Recovery Loan Scheme, GGS offers a 70% guarantee on lending, ultimately backed by the government. This guarantee is extended to the lender, while businesses remain fully liable for the borrowed amount under the Government Guarantee Scheme.
GGS covers term loans, overdrafts, asset finance, and invoice financing.
What is the government guarantee?
Under the Government Guarantee Scheme, if a business defaults on its loan, the lender can recover 70% of the outstanding loan value from the government. However, businesses remain fully liable for the debt.
Eligibility Criteria
Eligible entities under GGS include sole traders, limited partnerships, limited liability partnerships, corporations, co-operatives, community benefit societies, and other legal entities conducting business in the UK through a business account.
To qualify, businesses must:
Have a turnover of less than £45 million
Have been actively trading in the UK for at least two years
Generate more than 50% of turnover from UK trading activities (unless applying as a registered charity or further education establishment)
Demonstrate viability of the business proposition
Not be undergoing collective insolvency proceedings or other financial distress
Intend to use the loan for business purposes
Which businesses aren't eligible for the Growth Guarantee Scheme?
Ineligible entities include banks, insurance companies, state-funded schools, public sector bodies, and individuals (excluding sole traders or partners acting on behalf of a partnership).
When do businesses need to pay the money back?
Repayment terms vary based on the chosen financial product under the Growth Guarantee Scheme:
Up to six years for term loans and asset finance facilities (minimum three months)
Up to three years for overdrafts and invoice finance facilities (minimum three months)
When does the Growth Guarantee Scheme start and end?
The Growth Guarantee Scheme commences on July 1, 2024, and concludes on March 31, 2026.
Interest rates
Interest rates offered depend on the lender and the business's circumstances, capped at an annual effective rate of interest and upfront fees not exceeding 14.99%, as specified by the British Business Bank.
What can the funds be used for?
Funds obtained under the Government Guarantee Scheme can be utilised for various business purposes, such as managing cash flow, purchasing equipment, meeting one-off expenses, covering payroll, investing in marketing, or expanding operations.
FAQs
Why has the government extended and renamed the Recovery Loan Scheme?
In February 2024, the government designated the year as "the year of the SME," announcing initiatives such as the Help to Grow campaign and a small business council. As part of these efforts, the government extended and rebranded the Recovery Loan Scheme, now running until March 2026 under the name Government Guarantee Scheme. This extension aims to enable an estimated 11,000 smaller businesses to access crucial financing.
How does the Growth Guarantee Scheme differ from the Recovery Loan Scheme?
How much can I borrow under the Growth Guarantee Scheme?
Can sole traders access the Government Guarantee Scheme?
Can businesses apply for the Growth Guarantee Scheme if they previously borrowed under the Recovery Loan Scheme?
Can businesses apply for the Growth Guarantee Scheme if they previously had a Bounce Back Loan or borrowed under CBILS or CLBILS?
Can businesses with bad credit apply?
How much has been borrowed under the Recovery Loan Scheme, the Growth Guarantee Scheme's predecessor?
Will I need a credit check to apply?
Tips for applying for the Growth Guarantee Scheme
Clearly define the purpose of the loan in your business plan.
Prepare necessary documentation, including management accounts, financial statements, and asset information.
Consider applying through Approved Finance for guidance and to streamline the process.
Mistakes to avoid when applying
Ensure the financing aligns with your cash flow needs.
Borrow responsibly and realistically assess repayment capabilities.
Choose the right lender and financing type to avoid unnecessary delays.
How do I apply?
Applications for the Growth Guarantee Scheme (GGS) are now open! Please check your eligibility today.
If you have any urgent questions and would like to speak to a member of our finance team, feel free to call on 01908 429888 or email us via info@approved-finance.co.uk.