SME support

Loans on offer from refreshed guarantee scheme

Reinald de Monchy: the scheme has an important role in the market

About 11,000 businesses will receive support from the British Business Bank’s relaunched growth guarantee scheme through a range of lenders including NatWest (RBS).

The government’s economic development agency has approved 41 lenders to provide loans of up to £2 million guaranteed by the state for small businesses over the next two years.

Further lenders are going through the accreditation process and will be accredited over the coming weeks.

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

The scheme’s continuation was first confirmed by Jeremy Hunt, the former chancellor, in his March budget.

Reinald de Monchy, a managing director at the British Business Bank, said: “The scheme is an important part of the market, making sure finance is available to under-served small and medium-sized businesses,”

In the period from July 2022 to March this year, the bank said it had guaranteed £1.15 billion of lending under the scheme to businesses that, in many cases, had been rejected by the high street banks as presenting too high a credit risk.

The bank charges most lenders a 150 basis-point fee for the guarantee, which covers 70% of the lending in the event the borrower defaults.

It reduces its fee for small lenders, such as community development finance institutions. It also expects borrowers to receive any interest rate benefits that large banks gain from having to hold less regulated capital against the loans.

Finance agreements that are covered range from standard loans and overdrafts to asset finance, invoice finance and asset-based lending.

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