What Is Growth Guarantee Scheme For Commercial Mortgages?

What Is Growth Guarantee Scheme For Commercial Mortgages? The UK Growth Guarantee Scheme is a government initiative aimed at supporting companies by providing them with easier access to finance. The scheme is designed to address the challenge these businesses often face in securing sufficient funding to scale up their operations, expand, acquire premises or boost […]

July 3rd, 2024

What Is Growth Guarantee Scheme For Commercial Mortgages?

The UK Growth Guarantee Scheme is a government initiative aimed at supporting companies by providing them with easier access to finance. The scheme is designed to address the challenge these businesses often face in securing sufficient funding to scale up their operations, expand, acquire premises or boost their working capital.

How Does The Scheme Work?

The Growth Guarantee Scheme (GGS) supports term loans, commercial mortgages, overdrafts, asset finance, invoice finance and asset-based lending facilities, note though that not all lenders will be able to offer all products.

A few things to note:

Term loans, commercial mortgages and asset finance facilities are available from three months up to six years. Don’t panic, this doesn’t mean you need to have cleared your loan within this period, it is just the period covered by the Government guarantee.
Just because your business may have taken 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 30 June 2024 does not prevent businesses from accessing GGS.
The guarantee from the Government is made to the lender. The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility. The borrower always remains 100% liable for the debt.
Decision-making is delegated to the lender, it means each lender makes their own decision on whether they choose to lend, the guarantee is there to encourage lending and/or reduce the interest cost.

Commercial Mortgages

With every Government scheme there is one hidden gem, this may be the one here. The GGS can be used for businesses buying their own commercial premises. At a time when we are seeing an increase in landlords offering commercial tenants the chance to buy, this could be really well timed.

We are seeing commercial mortgages:

Up to 70% loan to value
Variable rates from 2.48% over base rate
Fixed rates from 6.41%

Bear in mind that when a lender looks at proving affordability they will adjust the income within the accounts and add back rents no longer payable. This generally means that swapping rent for mortgage allows the borrower to meet the lender affordability measure.

If you want more details then use the form below.

The Growth Guarantee Scheme replaces the Recovery Loan Scheme, the major difference when it comes to property finance is that the new GGS cannot be used for investment property, only owner-ocuppier commercial property but it does allow for both purchase and refinance.

For companies with expiring fixed rate commercial mortgages this scheme may be well timed.

For more details then get in touch.

By Dave Farmer

*Rates quoted accurate as at date of publication

David Farmer

Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.