In 2023, there were around 5.6 million businesses registered in the UK, and a whopping 99.9% of these were classified as small to medium sized businesses (SMEs). Furthermore, 99.2% of all businesses are under 50 employees, making small businesses the lifeblood of our economy. Indeed its hard to understate their importance to all aspects of national life and reveal the strong entrepreneurial heritage in place across the UK. Gross lending to these SMEs by UK banks in 2022 was £65.1 billion, up a staggering 12.8% from 2021. This is hardly surprising given the effects of the pandemic, recent economic turmoil and the rising cost of living on local small businesses. But also reveal the appetite of SMEs to turn to financing to helping them invest in their businesses and their growth.
However, growing a business is not always straightforward, especially if you're only making a small profit, or experience cashflow issues which can halt progress. You may have ambitious plans to scale, but investing in the infrastructure, equipment, supplies, facilities and staff you need to do so can be difficult for many business owners without access to additional support. But with strategic funding, it doesn’t have to be that hard to grow your company.
Support Programmes for UK Businesses
The government offers various support programmes, including R&D Tax Credits for research and development costs, various regional grant programs focused on specific sectors or job creation, and training and mentorship programs to support business development skills. In July this year, they also launched the Growth Guarantee Scheme, which replaces the previous Recovery Loan Scheme and offers small businesses the opportunity for better access to financing. The new scheme is expected to support up to 11,000 businesses by the end of March 2026, leading to increased job creation, innovation, and overall economic activity, importantly, it has the power to prevent more small businesses from failing. So its important SMEs understand this scheme and the opportunities it provides.
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More About the Growth Guarantee Scheme
The Growth Guarantee Scheme offers a range of financial products supported by a number of accredited lenders, including term loans, overdrafts, asset finance, invoice finance and asset-based lending. This gives small to medium sized businesses access to a wide variety of funding options, dependant on their specific needs, of up to £2 million. Under the scheme lenders receive a 70% government-backed guarantee. This means a lower risk for the lender, helping them feel more confident about lending to SMEs, a win-win all round. This is particularly important for smaller businesses who may sometimes struggle to secure funding from traditional lenders. In addition, as the lending risk is lower, given government backing, many lenders are willing to provide financing on more competitive terms or indeed lender higher loans amounts. All of which can make it easier for SMEs to access the potential financing they need.
The scheme is open to UK businesses with a turnover of up to £45m, which generate more that 50% of their income from trading activity. Much like the Recovery Loan Scheme, term loans and asset finance 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. Personal guarantees can be taken at the lender’s discretion, in line with their usual commercial lending practices.
The good news is that 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 the end of June 2024 are not prevented from accessing the new Growth Guarantee Scheme (however it may reduce the maximum amount the borrower is eligible for.)
What Can the Scheme Help to Support my Business With?
Because the scheme can cover a range of lending options, it can help with a multitude of different scenarios. Some of the most common issues small businesses face include cash flow issues, budgeting issues and the cost of replacing or purchasing new assets. The scheme can help with all of these areas, allowing businesses the freedom to consider their long-term growth plans.
Additional financing can also be key for helping small businesses achieve economies of scale. The more these businesses can grow, the more opportunity they’ll have to reduce costs such as manufacturing, rent, utilities and administrative expenses. Buying raw materials in larger quantities often leads to discounted prices from suppliers, and can also help reduce marketing costs per unit sold. It provides the opportunity for small businesses to secure enough capital to invest in expansion, whilst simultaneously meeting current operational costs and building a customer base. In short, it will help close the funding gap which prevents smaller businesses from scaling up or innovating. Although its still early days for the scheme, there are already 41 accredited lenders signed up to the Growth Guarantee Scheme, showing its growing reach.
How Do I Access the Scheme?
Because Growth Guarantee Scheme-backed facilities are provided at the discretion of the lender, a broker can help you with building out a robust and comprehensive proposal from start to finish, whilst also liaising with lenders on your behalf. Providing expertise and accelerating the process, whilst you focus on running your business.
As with most financing applications there’ll be some paperwork to provide, such as management accounts, cash flow forecasts, credit reports and so forth. With our detailed knowledge of the market, we can help present your information in the best light to the lender, so not only are you more likely to be approved, we’ll aim to get you the best possible terms for your circumstances.
“We’re committed to supporting small businesses and their owners, so we’re delighted about the new scheme which will allow lenders to offer better financing options to millions of small businesses, helping them scale up, stay ahead and grow. In turn this will help fuel sustainable growth across the UK, providing a much-needed boost to our economy.” Chris Davey, Corporate Adviser, Enness Global
If you’re a high-net-worth individual, wealth creator, SME business owner, founder or responsible for their financial arrangements, and need support accessing the Growth Guarantee Scheme for your business, or simply want to find out more about how business financing can help your company scale, please contact [email protected]
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