The British Business Bank has launched a successor to the Recovery Loan Scheme, which helps smaller businesses access finance. 

The Growth Guarantee Scheme will run until 31 March 2026 and will offer loans of up to £2m, with 70% government-backed guarantees. Minimum facility sizes start at £1,000 for asset finance, invoice finance and asset-based lending, and £25,001 for term loans and overdrafts. The British Business Bank says it expects to support around 11,000 smaller businesses with this latest scheme.

Accredited lenders will provide a wide range of finance types to smaller businesses, including term loans, overdrafts, asset finance, invoice finance and asset-based lending. 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. 

So far, 41 lenders for the Growth Guarantee Scheme have been accredited and 20 lenders have confirmed they are open for applications. The terms of the scheme are intended to remain broadly unchanged from its predecessor, the Recovery Loan 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. 

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.

Businesses that took out a Coronavirus Business Interruption Loan Scheme, Coronavirus Large Business Interruption Loan Scheme, Bounce Back Loan Scheme or a Recovery Loan Scheme facility before 30 June 2024 are not prevented from accessing the Growth Guarantee Scheme, but borrowing under these schemes may reduce the maximum amount the borrower is eligible for.

Reinald de Monchy, Managing Director, Guarantee and Wholesale Solutions, British Business Bank, says: “We’re excited to launch the Growth Guarantee Scheme, which will allow lenders to offer more finance to their customers. This will help to generate more sustainable growth across the UK and provide a springboard to many smaller businesses to scale up or stay ahead.”

A spokesman for the British Business Bank says the scheme would address a long-term structural issue of businesses, especially young businesses, being turned down for debt funding. There have been schemes along similar lines as the Growth Guarantee Scheme in place since the 1980s (starting with the Small Firms Loan Guarantee) and they provide very good value for money in terms of outlay versus the amount of lending they can potentially generate, he says.

David Petrie, ICAEW’s Head of Corporate Finance, says measures to increase the availability of funding to small businesses that might otherwise be struggling to access support are to be welcomed. 

“The fact that this is a 70% guarantee might make banks more supportive of marginal lending decisions. However, the challenge for the British Business Bank is to ensure that this scheme increases banks’ appetites for lending, rather than simply using taxpayer-backed support for business lending that the banks would have provided anyway.”

Petrie warns that businesses would be mistaken in thinking that this was an easy option for sourcing funding, and the same rigour must be applied in putting together any funding application under the scheme. 

“Although their lending criteria are slightly different, once one bank has said no, the chances are that all banks are going to say no to the same proposition. It might be that a different form of finance, like asset-based finance, might be more appropriate. This is where professional advice can be so important,” Petrie says.

The British Business Bank is the UK government’s economic development bank, established in November 2014 to drive sustainable growth across the UK and to enable the transition to a net-zero economy, by improving access to finance for smaller businesses.

As well as increasing the supply and diversity of finance for UK smaller businesses through its programmes, the Bank works to raise awareness of finance options available to smaller businesses via its British Business Bank Finance Hub.

• Further information on the Growth Guarantee Scheme, including the current list of accredited lenders, is available on the British Business Bank website.