Last post: Mar 7, 2024
The Growth Guarantee Scheme (GGS) has been announced as the successor to the Recovery Loan Scheme (RLS) and effectively it's back to business as usual.
From a business lending point of view, one of the key elements of the budget yesterday was the announcement that the Recovery Loan Scheme (RLS) would be extended but will now be known as the Growth Guarantee Scheme.
The RLS is due to end on June 30th 2024 but it will be replaced by the Growth Guarantee Scheme which begins on July 1st. Some points to note:
- There are approx 60 lenders eligible to lend under RLS so the expectation is that most/all of these will continue lend under the Growth Guarantee Scheme.
- The scheme will cover lenders offering loans, asset finance and invoice finance in amounts up to £2m.
- For most lenders, you can't choose to apply for a loan under the scheme and it's only where a leader decides the application is not strong enough to meet their normal lending criteria, and would otherwise be declined, that they can decide to lend under the scheme and benefit from the 70% guarantee the scheme provides them.
- Contrary to popular expectation, loans under the scheme are usually more expensive than a lender's normal rates.
- PGs from directors are usually required for loans but some lenders do accept reduced PGs, sometimes as low as 25%
- The Growth Guarantee Scheme is currently scheduled to run until 31st March 2026 but I would expect it will be extended beyond this. Even before all the CBILs and RLS that was introduced in response to the pandemic we had the Enterprise Finance Guarantee (EFG) scheme which gave lenders 70% backing to eligible loans so all we're doing now is continuing this and having a scheme with a government-backing is "business as usual". That said, the RLS/GGS have been much slicker schemes and have been embraced by more lenders than the old EFG ever was.
In summary then, things just carry on as they have been for the past 18 months since the latest version of the RLS. This finance will continue to help "edge cases" for lenders and allow them lend where they otherwise wouldn't have. In so doing it allows more businesses to borrow which is positive.
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