The Recovery Loan Scheme becomes the Growth Guarantee Scheme

The Recovery Loan Scheme (RLS)has been replaced by the Growth Guarantee Scheme (GGS). The new scheme provides a 70% Government guarantee on loans to SMEs of up to £2m million in Great Britain, and £1m in Northern Ireland.

The original Recovery Loan Scheme was put in place to help SMEs grow and invest through government-backed loans. It was seen as a lifeline for many smaller firms, who were still reeling from the effects of Brexit and COVID. The scheme was also very popular, with government figures showing that it has supported almost 19,000 businesses, each borrowing an average of £202,000.

The new Growth Guarantee Scheme is essentially another extension of the original scheme, which was due to end in June 2024 (the current plan has the Growth Guarantee Scheme running until the end of March 2026). The continuation of government support is great news for smaller businesses, especially those battered by economic turbulence over the last few years.  

Although we have a fresh government in place, the scheme is expected to continue. We look forward to hearing how small businesses will be further supported, especially as Labour made a pledge in their manifesto to improve access to finance for smaller businesses, especially startups.
In this article, we answer frequently asked questions about the Growth Guarantee Scheme.

What is the Growth Guarantee Scheme?

The Growth Guarantee Scheme replaced the Recovery Loan Scheme on the 1^st of July 2024. Accredited lenders can offer a range of finance solutions including asset finance, invoice finance and business loans.

These lenders must first offer their standard products, but if these can’t be used, they can use a 70% government-backed guarantee to give extra security so that they can lend as part of the Growth Guarantee Scheme. It’s important to remember that this guarantee is there to facilitate the finance, but the borrower is still liable for the entirety of the debt.

An SME must make more than half of its income from UK-based trading to be eligible for a loan. The business must not be in any financial difficulty and they have to be able to afford what they’re borrowing. This means that businesses will still face all the usual credit and fraud checks.

What is classed as an SME for the purposes of applying for finance through the Growth Guarantee Scheme?

An SME is essentially any smaller business with no more than £45m turnover. If an SME is part of a group, then the whole group’s income is considered.

Can every industry use the Growth Guarantee Scheme?

Businesses from every sector can use the Growth Guarantee Scheme; however, some sectors, including agricultureand fisheries/aquaculture are subject to a borrowing cap.

What can the Growth Guarantee Scheme be used for?

One clear benefit of the Growth Guarantee Scheme is that the finance can be used for a wide range of reasons. An SME might choose to hire new staff, upgrade their equipment or buy new plant and machinery, fit out their premises or invest in new vehicles. These could also use the cash for simply boosting working capital or helping to manage their cashflow.

What is the minimum SMEs can borrow under the Growth Guarantee Scheme?

With Origin Finance, businesses can borrow from £10,000 with asset finance and invoice finance. For loans, borrowing starts at £25,001, through the Growth Guarantee Scheme.

Can SMEs borrow with the Growth Guarantee Scheme if they’ve previously used another government-backed scheme?

Yes! Even if your business has used the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) or the Recovery Loan Scheme (RLS) you’re still able to apply for finance with the Growth Guarantee Scheme. However, if you have borrowed under a previous scheme, it’s likely that you won’t be able to borrow as much using the Growth Guarantee Scheme.

Does borrowing under the Growth Guarantee Scheme require a personal guarantee?

Not necessarily. Personal guarantees are at the lender’s discretion and will often depend on your circumstances.

How can Origin Finance help?

Despite being a government-backed scheme, interest rates, fees, and term lengths from lenders will still vary. As a broker, we can find the best solution available for your business. This can provide huge value for you as securing a competitive rate over a length of time that works for you can make a big difference to your day-to-day finances. What’s more, we don’t charge for our services, as we’re directly remunerated by the lender.

By partnering with Origin Finance, you’ll also be speaking to a passionate team with a wealth of experience in helping smaller businesses succeed. They’ll be able to advise you on the options available and even complete the paperwork to give you the best possible chance of success.

Get in touch for a free, no-obligation quote today.

If you like this article, you may also enjoy reading: