Growth Guarantee Scheme Broker: Using GGS Alongside Senior Debt
For larger SMEs, the Growth Guarantee Scheme works best as one tranche in a wider package. We explain how GGS sits alongside senior debt, ABL and RCFs, what lenders look at and how to structure it.
Tom Renshaw9 min readA good Growth Guarantee Scheme broker does more than find a lender that offers GGS. For a larger SME, the real value is fitting a GGS facility of up to £2m alongside senior debt, asset based lending or a revolving facility so that the whole package works, and choosing the accredited lender whose credit appetite suits that structure. The guarantee changes how much risk a lender will take on the GGS tranche; it does not change how the rest of your borrowing is assessed.
This article is for owners and finance directors of established UK businesses, typically raising £1m or more in total, who already have bank debt or are planning a larger raise and want to know where GGS fits. If you want the scheme basics first, start with our Growth Guarantee Scheme guide.
Key facts
- Facility size: GGS supports facilities of up to £2m per group, with a 70% government guarantee to the lender.
- Turnover: the British Business Bank states the scheme is open to businesses with a turnover of up to £45m, measured on a group basis.
- Who decides: eligibility decisions are fully delegated to accredited lenders, and every facility is at the lender's discretion.
- Your liability: the guarantee protects the lender, not you. Your business owes the full debt.
- Subsidy limit: GGS support counts as a subsidy, and there is a limit on how much subsidy a business can receive over a three-year period.
- Alongside other debt: in larger deals GGS is usually one tranche in a wider package, sitting next to senior term debt, an RCF or an ABL facility priced from 2% over Bank Rate.
Why GGS matters for larger SMEs
For a smaller business, GGS is often the whole facility. A larger SME may already have a term loan, an invoice discounting line or an asset based facility, and the question is whether GGS can add capacity that the existing lenders will not provide on normal terms.
The answer is often yes, because of what the guarantee does to the lender's risk. With a 70% government guarantee to the lender on the GGS facility, a credit committee can say yes to things it would otherwise decline or price heavily:
- lending beyond the point where the security runs out, for example funding growth that is not yet backed by debtors or stock
- extending leverage a little further than its standard policy would allow for a business with good cash flow but limited hard assets
- providing an unsecured or lightly secured tranche alongside a secured facility from the same lender
What GGS does not do is rescue a weak credit. Accredited lenders still run their normal credit, fraud and know-your-customer checks, and the scheme includes a viability test. A business that cannot show it can service the debt will not get GGS, whatever the guarantee.
How GGS sits alongside senior debt and ABL
The three common structures
In practice we see three ways of combining GGS with other borrowing.
| Structure | How it works | Best suited to | What to watch |
|---|---|---|---|
| GGS term loan alongside an ABL or invoice facility | The ABL or invoice facility funds working capital against debtors and stock; a GGS term loan of up to £2m funds investment | Distributors, manufacturers and B2B services with a strong debtor book | Security priority between the two facilities, and whether one lender provides both |
| GGS tranche within a senior term loan | The lender splits its facility: part on normal terms, part under GGS | Profitable businesses with limited assets, such as professional services or technology | Covenants are set across the whole facility, not just the GGS part |
| GGS RCF or overdraft next to an existing term loan | GGS supports a revolving facility for headroom while the term loan stays in place | Seasonal or project-based businesses that need flexible working capital | Clean-down or headroom tests on the revolving line |
One lender or two
The simplest structure is one accredited lender providing both the GGS facility and the rest of the package. It holds all the security, sets one covenant package and there is no argument about who ranks first.
Where your existing lender is not GGS accredited, or will not offer GGS on the terms you need, a second lender can provide the GGS tranche. That works, but it brings in an intercreditor agreement, a negotiation over security priority and two sets of reporting. Your incumbent lender has to consent, and the new lender has to be comfortable with where it ranks.
Using GGS in an acquisition
GGS can play a role in a business purchase, but it is rarely the main source of funding on larger deals. Acquisition finance is usually sized on the combined business's EBITDA, up to 5x EBITDA and up to 7 years, and GGS sits within that as one tranche rather than replacing it. Our acquisition finance broker and MBO funding pages explain how those deals are built.
What lenders look at
Because decisions are delegated to accredited lenders, each one applies its own credit policy to GGS. The headline rules are the same across lenders, but appetite is not. Here is what credit committees focus on for a larger SME.
Cash flow and serviceability
The lender will test whether the business can service all of its debt, not just the GGS facility. That means management accounts, a forecast with the new borrowing included, and clear evidence of how the facility will be repaid. Senior term loans are typically sized up to 4x EBITDA, and the GGS tranche counts towards that total.
What the money is for
GGS is designed to support growth and investment. A lender will want a specific use of funds: a new site, a contract that needs working capital, equipment, an acquisition or refinancing debt that is holding the business back. A vague "general working capital" case is harder to approve.
Group structure and existing borrowing
The £2m limit applies per group, so lenders look across every company in the group. Earlier government-backed borrowing and other subsidies matter too, because of the subsidy limit over a three-year period. Have a clear group structure chart and a schedule of all existing facilities ready.
Security
The guarantee does not remove the lender's interest in security. Expect the lender to take a debenture over the business and, depending on the deal, other security. The level of personal support is at the lender's discretion and is worth negotiating as part of the wider package.
Costs and terms
Pricing for GGS facilities is set lender by lender and deal by deal. The guarantee often allows a lender to offer better terms than it would on an unsupported facility of the same risk, but there is no single scheme rate. As a guide to the rest of the package:
| Facility | Indicative terms |
|---|---|
| Senior term loan | From 2.5% over Bank Rate, up to 4x EBITDA, 1 to 10 years, unsecured up to £2m |
| Revolving credit facility | From 2.5% over Bank Rate, 3 to 5 years committed |
| Asset based lending | From 2% over Bank Rate, receivables up to 90%, stock up to 90% of NOLV, 3 to 5 years |
| Invoice finance | Up to 90% of approved debtors |
| Asset finance | Up to 100% of cost, 2 to 7 years |
| Commercial mortgage | From 1% over Bank Rate, up to 75% LTV |
Bank Rate is currently 4%, following the Bank of England's rise on 5 November. Margins are quoted over Bank Rate because most facilities float, so it is worth discussing hedging or a fixed element when you take on a larger package.
When comparing offers, look past the margin: fees, covenants and the length of the commitment all matter, and on a multi-facility package the blended cost is what counts.
Documents to prepare
Lenders move faster when the pack is complete from day one. For a larger SME raising GGS alongside other debt, prepare:
- two to three years of filed accounts and current-year management accounts
- a monthly cash flow forecast for at least the next 12 months, showing all existing and proposed debt
- an aged debtor and creditor list, and a stock report if stock forms part of the security
- a group structure chart and a schedule of existing facilities, including any earlier government-backed loans
- a short business plan explaining what the funding is for and the return it will generate
Common mistakes
- Treating GGS as the whole answer. For a larger business, £2m is often only part of what is needed. Start with the total requirement and build the structure around it.
- Asking only your existing bank. Not every lender is accredited, and appetite varies. A business declined by one lender can approach others in the scheme.
- Ignoring the group limit. The £2m cap and the subsidy limit apply across the group, so borrowing in another group company can reduce what is available.
- Leaving the intercreditor until late. If two lenders are involved, agree security priority early. It is the most common cause of delay.
How GBF helps
As a commercial finance broker and debt adviser, we start with the whole funding requirement, not just the GGS element. We prepare a credit paper that answers a credit committee's questions before they are asked, approach the lenders best suited to the deal from a whole-of-market panel of 650+ lenders, including accredited GGS lenders, negotiate terms and the intercreditor position, and manage it to completion. See our Growth Guarantee Scheme page for how we run the process, or our business loans and debt advisory pages if GGS is one part of a larger raise. Our industries page shows the sectors we fund.
FAQs
Can I use the Growth Guarantee Scheme if I already have bank debt?
Yes, in many cases. GGS can sit alongside existing facilities, either from your current lender if it is accredited or from a second lender with an intercreditor agreement. The lender will assess your total borrowing, and finance is subject to status and lender approval.
Is the £2m limit per company or per group?
The limit is up to £2m per group, so all companies in the group count towards it. Earlier government-backed borrowing and other subsidies can also reduce what is available because of the subsidy limit over a three-year period.
Does the government guarantee protect my business?
No. The 70% guarantee is given to the lender. Your business remains responsible for repaying the full facility, and the lender can still take security and enforce it in the usual way.
What turnover limit applies?
The British Business Bank currently states the scheme is open to businesses with a turnover of up to £45m on a group basis. Scheme rules are updated from time to time, so we check the current position with lenders on every deal.
Why use a broker for GGS rather than going direct?
Accredited lenders apply their own credit policy, so appetite for a particular sector, structure or size varies widely. A broker who knows which lenders will support GGS alongside senior debt or ABL can help you avoid approaching the wrong ones, and can negotiate the whole package rather than one facility.
How much can a larger SME raise in total?
GBF arranges facilities from £200k to £100m. GGS provides up to £2m of that, with the rest sized on cash flow, assets or property. Our article on how much your business can borrow explains how lenders size each part.
If you are planning a raise and want to know whether GGS should be part of it, check what you could raise or call us on 020 3432 2341.
Sources
Tom arranges business loans, asset based lending and property finance for UK SMEs and mid-market companies. More about GBF
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