Asset finance lenders backing Growth Guarantee Scheme

Eight asset finance companies are among the first twenty lenders to confirm they are open to applications to the British Business Bank’s new Growth Guarantee Scheme (GGS), the successor to the Recovery Loan Scheme.

The GGS is designed to support access to finance for UK smaller businesses as they look to invest and grow and is expected to support around 11,000 companies between 1st July 2024 and 31st March 2026. 

The British Business Bank has so far accredited 41 lenders for the new scheme. Following their accreditation, each lender needs to put in place the operations required to start lending under the scheme, with Close Brothers, Allica Bank, Haydock Finance, Shire Leasing, Simply Asset Finance, Arkle Finance, Tower Leasing and Genesis Asset Finance now all on the official list.

The terms of the scheme remain broadly unchanged from its predecessor and include: 

• Minimum facility sizes start at £1,000 for asset finance, invoice finance and asset-based lending, and £25,001 for term loans and overdrafts, with a maximum of £2 million per business group.
•  The GGS supports term loans, overdrafts, asset finance, invoice finance and asset-based lending facilities.
•  Term loans and asset finance facilities are available from three months up to six years, with overdrafts, invoice finance and asset-based lending available from three months up to three years.
•  Businesses that took out a Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) or a Recovery Loan Scheme (RLS) facility before 30th June 2024 are not prevented from accessing the GGS, but borrowing under these schemes may reduce the maximum amount the borrower is eligible for.
•  Interest rates and fees charged by lenders will vary and will depend on the specific lending proposal.
• Personal guarantees can be taken at the lender’s discretion, in line with their normal commercial lending practices. Principal Private Residences cannot be taken as security within the scheme.
• The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it has completed its normal recovery process. The borrower always remains 100% liable for the debt.
•  GGS-backed facilities are provided at the discretion of the lender. Lenders are required to undertake their standard credit and fraud checks for all applicants. 

Martin McTague, National Chair of the Federation of Small Businesses (FSB) said: “The GGS will be an important part of the funding landscape for small firms, whose growth will be an indispensable ingredient in overall economic recovery in the UK.”

However, McTague cautioned that the overall outlook for SME lending is  challenging, stating: “Small firms’ borrowing environment remains held back by stubbornly high interest rates and some reluctance among lenders to extend finance to firms seen as riskier and less viable due to their size and the diversity of proposals compared to their standard/corporate counterparts.

“The over-application of personal guarantees has also dampened further small firms’ enthusiasm for borrowing to fund expansion which requires corrective action by the FCA under direction of the new Treasury, which the Chancellor said will be the most pro-growth Treasury the country has ever seen.”

The FSB chair was a speaker at AFC’s summer conference in a session which looked at the issues around funding for SMEs and the opportunities for asset finance lenders. Catch up on the panel’s discussions in the AFC webinar update here.