As a business owner, you know that securing financing can be a major challenge. Especially for small and medium-sized businesses, traditional lending options may not always be accessible or feasible. That's where the UK Government's Growth Guarantee Scheme comes in ...
The Growth Guarantee Scheme, previously known as the Small Firms Loan Guarantee Scheme, has been relaunched multiple times over the years, most recently as the Recovery Loan Scheme (RLS).
Now, it has been rebranded as the Growth Guarantee Scheme, with the aim of providing businesses with even more support and opportunities for growth. The scheme is managed by the British Business Bank and is available through a variety of lenders, including high-street banks.
In essence, the Government guarantees 70% of the amount borrowed to the lender, giving them security for a big part of the facility. This means that lenders may be more willing to provide financing to businesses that may not have sufficient collateral or security. However, it's important to note that the borrower is still liable for 100% of the debt, and the Government's guarantee only kicks in if the borrower cannot repay the loan.
One of the major benefits of the Growth Guarantee Scheme is its flexibility. The scheme can be used to support a variety of financing options, including overdrafts, term loans, asset finance, and invoice discounting facilities.
This means that businesses can choose the option that best suits their needs and goals. Additionally, the maximum amount that can be borrowed under the scheme is £2 million for any group of companies, making it accessible to a wide range of businesses.
Businesses with an annual turnover of up to £45 million are eligible, as long as at least 50% of their turnover comes from trading activities. This means that businesses that primarily generate income from investments may not be eligible. Additionally, the lender will need to assess the borrower's viability and ensure that they are not considered a business 'in difficulty' which would exclude them.
As with any financing option, there are fees and interest rates involved in the Growth Guarantee Scheme. These are determined by the lender and may vary widely. It's important to shop around and compare offers from different lenders to ensure you're getting the best deal.
Additionally, some lenders may require a personal guarantee from directors, but they are not allowed to ask for security over the directors' principal private residences. It's crucial to negotiate and try to minimise the level of personal guarantee required, or even eliminate it if possible.
Now, you may be wondering, why you should consider the Growth Guarantee Scheme instead of traditional lending options? Well, for starters, the Government's guarantee can provide lenders with the security they need to offer financing to businesses that may not have sufficient collateral.
This means that businesses that may have been turned down for loans in the past may now have a better chance of securing the funding they need. Additionally, with the scheme's flexibility and wide range of eligible financing options, businesses can choose the option that best suits their needs and goals.
With the Government's backing and a wide range of eligible financing options, this scheme can provide businesses with the support they need to thrive and succeed. If you're considering applying for the scheme, be sure to do so before any financial challenges arise.
Being 'in difficulty' will affect your eligibility.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.