Access to finance is a critical driver of business growth and for many UK SMEs, the Growth Guarantee Scheme (GGS) could be the key to unlocking their next stage of expansion. Designed to help businesses secure funding they might otherwise struggle to access, this government-backed scheme gives lenders the confidence to offer finance on more favourable terms.
Here’s how it works:
The GGS provides participating lenders with a government-backed guarantee for 70% of the loan value. This doesn’t mean the Government is lending a business money directly, they are still fully responsible for repayment, but it does reduce the lender’s risk, making them more likely to approve an application.
Let’s translate this into simple terms:
- A successful GGS application can help a business access loans, overdrafts and other facilities that might otherwise be out of reach.
- The guarantee can mean lower interest rates, better repayment terms and a higher chance of approval, especially for businesses with limited collateral or a short trading history.
To be eligible, businesses must typically:
- Be UK-based and generating more than 50% of turnover from trading activity.
- Have a viable business plan and demonstrate they can afford to repay the finance.
- Be seeking finance from an accredited GGS lender.
- Meet the specific size criteria, usually SMEs with turnover up to £45m.
It is important to note that there are also restrictions. Certain sectors, such as banks, insurers and public-sector organisations, are excluded. Also, whilst the Government backs the guarantee, lenders still carry out full credit and affordability checks.
When considering an application, the best advice is to be proactive. Prepare financial information before an application is made, up-to-date management accounts, cash flow forecasts, and details of how the funds will be used is a must. If a business has faced credit challenges in the past, they need to be upfront about what happened and how they have been addressed. A clear, realistic plan will significantly improve the chances of approval.
It is important to remember, the Growth Guarantee Scheme isn’t just a lifeline, it’s an opportunity to invest in growth. Whether the need is to hire more staff, purchase equipment, or manage working capital, this scheme could help secure the funding needed on terms that support the long-term business success.
Chris Morris, the Managing Director of NGI Finance has this to say about the GGS:
“Because lenders are actively utilising this scheme, the opportunity to secure funding is significantly enhanced. In many cases, it allows for a broader range of elements to be financed through asset finance.
The application process remains the same, a business applies to the lender as usual but if they offer terms under the GGS, you may receive more favourable conditions. In some instances, applications that might otherwise have been declined could now be approved.
It’s essential, however, to demonstrate that the funding is being used to support genuine growth initiatives. This is not intended simply for loan consolidation or general working capital. The purpose should be meaningful and clearly linked to business expansion plans.”
One recent example saw us arrange asset finance under the GGS loan to support a storage company’s expansion, funding the addition of a new mezzanine floor and lift. What made this deal stand out was that, unlike most asset finance arrangements that exclude installation costs, the lender agreed to cover the entire project. With funding for both the equipment and the installation, it allowed the business to expand seamlessly.
Should you have any questions or need some help please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.
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