Can you get a Growth Guarantee Scheme loan if you still have a Bounce Back Loan?

Yes: having a Covid-era loan does not stop you applying for a Growth Guarantee Scheme loan. The British Business Bank’s position is that borrowers with a Bounce Back Loan, CBILS, CLBILS or Recovery Loan Scheme facility “are not prevented from accessing GGS, but borrowing under these schemes may reduce the maximum amount the borrower is eligible for”.

Two separate things decide what happens next. The first is the subsidy limit, a rule of the scheme. The second is the lender’s own view of whether you can afford more debt. This post covers both. For how the scheme itself works, see our Growth Guarantee Scheme guide.

No. Because these borrowers are not prevented from accessing the scheme, an older loan does not have to be cleared before you apply, and you can hold a Bounce Back Loan and a Growth Guarantee Scheme facility at the same time.

Each loan then runs on its own terms. The Bounce Back Loan stays at its fixed 2.5% a year and keeps its Pay As You Grow options. The new facility is priced and assessed separately by the lender that offers it. What has to work is the total: both repayments, every month, out of the same cash flow.

Paying the older loan down first is a choice, not a condition. It reduces what a lender has to allow for, but it also uses cash, and the Bounce Back Loan’s rate is fixed at 2.5% a year.

It matters because a Growth Guarantee Scheme facility is a subsidy, and subsidies are capped. Outside the scope of the Northern Ireland Protocol, the limit for a borrower or its group is £315,000 across the current UK fiscal year, 1 April to 31 March, and the two preceding fiscal years. For general sectors in scope of the Protocol, it is £255,000 (€300,000) across the three years before the facility’s offer date.

Primary production agriculture, fisheries and aquaculture in scope of the Protocol have lower subsidy limits and use the current fiscal year of the business or group plus its two preceding fiscal years. Ask the lender to confirm which limit and period apply.

The subsidy is not the amount of the loan. It is a calculated value of the benefit the guarantee gives you, and the lender tells you the figure. You declare the relevant subsidies you have already received and confirm in writing that the new facility will not take you over the limit.

Most Covid-era loans do not count towards the subsidy limit, but later Recovery Loan Scheme facilities do. What matters is the scheme and the date the facility was offered.

Finance from the Northern Powerhouse, Midlands Engine and Cornwall and Isles of Scilly investment funds also counts. Facilities supported by UK Export Finance do not. Whatever the table says for your loan, declare everything: the British Business Bank’s wording is that borrowing under the earlier schemes may reduce the maximum you are eligible for, and the lender makes that assessment.

A lender will look at whether your business can afford the new repayments on top of the ones you already make. The scheme leaves the credit decision with the lender, which must consider that you have a viable business proposition. Expect questions about:

• The balance, monthly repayment and remaining term of each existing loan.
• Whether repayments have been made on time.
• Whether you have used Pay As You Grow on a Bounce Back Loan. The British Business Bank says this will not affect your credit rating, but may affect lenders’ future creditworthiness assessments.
• Cash flow after all debt repayments, old and new.

They differ on almost every term except one: you are fully liable for the debt under both. A Bounce Back Loan was a standard product with terms fixed by government. A Growth Guarantee Scheme facility is commercial lending with a guarantee behind it, so the lender sets the price and makes the decision.

Security works differently too. Under the Growth Guarantee Scheme a lender can ask for a personal guarantee at its discretion, in line with its normal lending practice, but it cannot take your main home as security.

Because the price is set lender by lender, scheme offers need comparing in a way Bounce Back Loans never did. Our guide to comparing lender offers on total cost shows how, and the overview of government-backed business loans sets out which schemes are open and which have closed.

It can, but that is rarely a reason to do it. Refinancing existing debt, including a Bounce Back Loan, CBILS or Recovery Loan Scheme facility, is possible under the scheme as a new application. The British Business Bank notes that borrower protections and terms differ between the schemes and that you should discuss it with your lender first.

A Bounce Back Loan is fixed at 2.5% a year, so replacing it with commercial borrowing will usually cost more. CBILS had its own limits on personal guarantees. The pages on Bounce Back Loan repayment options and on CBILS and Recovery Loan Scheme facilities set out what you would be leaving behind.

Have the usual business finance paperwork ready, plus the details of every loan you already hold. Each lender sets its own list, so treat this as a starting point:

• Your latest filed accounts, and management accounts if those are more than a few months old.
• Recent business bank statements.
• For each existing loan: the scheme, the lender, the offer date, the balance, the monthly repayment and any Pay As You Grow option in use.
• The paperwork showing the subsidy value of any Recovery Loan Scheme facility offered from 1 August 2022, or any earlier Growth Guarantee Scheme facility.
• A cash-flow forecast that shows the old and the new repayments together.
• A short statement of what the new facility is for.

On that last point, the scheme can be used for any legitimate business purpose, including managing cash flow and investment, so say plainly what the money will do.

The mistake to avoid above all is leaving earlier borrowing off the application. You confirm your position on subsidies in writing, and existing repayments show in your bank statements in any case. Others to avoid:

• Assuming the Bounce Back Loan must be repaid first. It does not have to be.
• Treating the loan amount as the subsidy. The subsidy is a separate calculated value, and the lender tells you what it is.
• Asking for the scheme maximum. Ask for what your cash flow supports after existing repayments.
• Reading “guarantee” as protection for you. The guarantee is to the lender, and you remain 100% liable for the debt.
• Assuming that qualifying for a Bounce Back Loan means you qualify now. Scheme facilities are provided at the discretion of the lender.
• Showing a temporary repayment as the normal one. If you are paying interest only or on a repayment holiday under Pay As You Grow, show the repayment you will return to.

Applying is the wrong move if the existing loan is already a strain. More debt does not fix a repayment problem, and you remain 100% liable for a Growth Guarantee Scheme facility: the 70% guarantee is to the lender.

• If cash is tight because of the Bounce Back Loan, ask your lender about Pay As You Grow first.
• If your group is close to the subsidy limit, the scheme may not have room for the amount you need, and finance outside the scheme may suit better.
• If the lender can offer a commercial loan on better terms, the British Business Bank says it will do so, so the scheme may not come into it.

1. List every loan the business and its group hold, with the scheme, the offer date, the balance and the monthly repayment.
2. Find the subsidy value for any Recovery Loan Scheme facility offered from 1 August 2022, or ask that lender for it.
3. Work out what you could afford each month on top of existing repayments.
4. Approach an accredited lender, or use a broker to find lenders that fit.

Capzy is a credit broker, not a lender, and gets paid by the lender. We take your details once, including existing loans, and introduce you to lenders that may fit, subject to status and lender criteria. Scheme facilities are only available through British Business Bank accredited lenders, and the lender decides whether to use the scheme. You can check your funding options without affecting your credit score; a full application to a lender may involve a hard search.