If you are a small business owner or operator, you’ve probably been hearing about the Growth Guarantee Scheme recently. It’s recent introduction has certainly been making noise, but what exactly is it, and how can it benefit your business?

The Growth Guarantee Scheme is the successor to the now-defunct Enterprise Finance Guarantee (EFG). Like its predecessor, the Growth Guarantee Scheme is a government-backed initiative designed to help viable small businesses access the funding they need to expand.

However, it’s been updated to provide more support for businesses looking to grow and scale their operations. In this article, we’ll explain how the scheme works, its benefits, and how to apply.

What is the Growth Guarantee Scheme?

The Growth Guarantee Scheme is an enterprise finance program that enables small and medium-sized enterprises (SMEs) across the UK to secure the capital they need to grow. The scheme is specifically designed for businesses that are experiencing or aiming for growth but may face challenges in securing traditional loans. It allows companies to overcome cash flow obstacles and embark on growth-enhancing projects or operations.

How Does the Growth Guarantee Scheme Work?

The scheme is backed by the UK government, along with private banks and other financial institutions. Essentially, the government provides a guarantee to lenders that if a business is unable to repay the loan, the lender will be reimbursed. This reduces risk for lenders, making them more likely to extend credit to businesses that might not otherwise meet the usual borrowing criteria.

Who Is Eligible for the Growth Guarantee Scheme?

To qualify for the Growth Guarantee Scheme, your business must meet certain criteria:

•Be a limited company, partnership, or another eligible entity with a turnover of less than £45 million.

•Be located in the UK and operating primarily in the UK.

•Demonstrate that your business has a solid plan for growth and is financially viable.

•Be able to show that you have been turned down for a standard loan or credit facility due to insufficient collateral or security, but would otherwise qualify for funding based on your business potential.

Key Features of the Growth Guarantee Scheme

• Facility Limit: Borrowers can access up to £2 million per business group, with the cap reduced to £1 million for those under the Northern Ireland Protocol. The minimum facility sizes vary, starting at £1,000 for asset finance, invoice finance, and asset-based lending, and £25,001 for term loans and overdrafts.

• Wide Range of Financial Products: The scheme supports various financial products, including term loans, overdrafts, asset finance, invoice finance, and asset-based lending facilities. However, not all lenders offer every product under the scheme.

• Flexible Terms: Term loans and asset finance are available for durations ranging from three months to six years. Overdrafts, invoice finance, and asset-based lending facilities are available for terms of three months to three years.

• Access to Multiple Schemes: Businesses that previously accessed schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS), or Recovery Loan Scheme (RLS) can still apply for the Growth Guarantee Scheme. However, prior borrowing under these schemes may reduce the maximum amount you are eligible to borrow under GGS.

• Pricing: Interest rates and fees vary by lender and depend on the specific lending proposal. The pricing will factor in the benefit of the government guarantee, but final terms will be set by the lender.

• Personal Guarantees: Lenders may request personal guarantees in line with their standard commercial lending practices. However, Principal Private Residences cannot be taken as security under this scheme.

• Government-Backed Guarantee: The scheme provides a 70% government-backed guarantee to the lender on the outstanding balance after the lender has followed its recovery process. Despite this, borrowers remain 100% liable for the debt.

• Lender Discretion: Decisions on GGS-backed facilities are fully at the discretion of the lender. Lenders are required to conduct their standard credit and fraud checks before approving any applications.

How to Apply for the Growth Guarantee Scheme

Here are the steps you should take to apply for the scheme:

1. Check your eligibility: Review the criteria to ensure your business qualifies.
2. Prepare your application: Gather all required documents, including your business plan, financial statements, and evidence of income.
3. Submit your application: Fill out the application and submit it to a participating lender.
4. Review and accept terms: Once approved, carefully review the loan terms and conditions before signing the agreement with your lender.

Applying for the Growth Guarantee Scheme can be daunting and time-consuming, as it involves a detailed assessment of your business’s financials and growth potential. This is why partnering with an independent broker like Pegasus Funding can greatly improve your chances of success.

Pegasus can guide you through the application process, help ensure you meet the eligibility criteria, and save you time by handling the complex paperwork, allowing you to focus on running your business.

The Growth Guarantee Scheme is a valuable tool for small businesses looking to expand, whether you need funds to purchase equipment, acquire other businesses, or finance new growth opportunities. With reduced risk and increased access to finance, it can be the key to unlocking your company’s next stage of growth.

If you’re interested in applying for the Growth Guarantee Scheme, Pegasus Funding can help guide you through the process. Our team understands the importance of securing the right finance for your business and is ready to assist. Contact us today to learn more about how we can support your growth journey.