The guarantee sits behind the lender

The scheme does not replace a lender's own assessment of your business. You still need to meet that lender's usual lending criteria, covering trading history, sector and affordability in the normal way. What the scheme adds is a second filter sitting on top: the business also has to meet the scheme's own eligibility rules before a lender can offer a facility backed by it.

A ceiling applies to how much you can borrow

The scheme sets a maximum size for any facility it sits behind, and that ceiling is set and reviewed by government. It can also differ depending on the type of finance involved, since a term loan, an asset finance arrangement and an invoice finance facility each carry their own structure before the scheme is applied. Because the scheme's terms are reviewed periodically, the current ceiling is worth checking directly with a lender at the point you apply.

A guaranteed percentage goes to the lender.

Government guarantees a portion of what a participating lender stands to lose if your business cannot repay. That percentage is a term of the arrangement between government and the lender. It does not reduce the amount you owe, and it is not a guarantee that your application will be approved.

If you want to see how a facility backed by this scheme compares with the other instrument families available to your business, the finance type navigator runs through purpose, legal form and guarantee willingness together, and each instrument is set out in full on the finance instrument reference.

When a lender asks for security on a business loan, it is naming something it can sell if the loan is not repaid. That might be the business's premises, its equipment, or money it is owed by customers. For many sole traders and smaller companies, the only asset of real value is the director's own house, so lenders have sometimes looked there too.

A loan made under the Growth Guarantee Scheme removes that option. The rules governing the scheme state that a lender cannot take a borrower's main residence as security for the facility. That protection sits alongside the lending itself.

What "main residence" covers

The exclusion applies to the home the borrower actually lives in. It does not extend to a second property, a buy-to-let, or land and buildings the business owns and trades from. A lender can still take a charge over commercial premises, stock, invoices or other business assets under a Growth Guarantee Scheme loan, exactly as it could under an ordinary commercial loan.

What the rule does not change

Ruling out the home as security is not the same as ruling out a personal guarantee. A guarantee is a separate promise to repay from personal funds if the business cannot, and a lender can still ask a director to sign one. If that guarantee is called on and the director cannot pay, the home is not protected from the general process of recovering a debt in the way it is protected from being named as security on the loan itself. The two protections work differently, and it is worth reading them as separate questions.

A government guarantee on a business loan sits between the lender and the government. It is not a guarantee to you, and it does not reduce the amount you owe.

What the guarantee pays the lender

The Growth Guarantee Scheme gives the lender a promise that, if your business cannot repay, the government will cover part of what the lender loses on that loan. This is what persuades a lender to approve lending it might otherwise decline, usually because the business is newer, or has less security to offer than the lender would normally want.

What stays yours

The guarantee runs between the lender and the government. Your agreement is still with the lender, for the full amount you borrowed. If repayments stop, the lender pursues you first, through the same recovery steps as any other business loan: default, formal demand, and enforcement against whatever security or personal guarantee you gave. Only once the lender has done what it can to recover the debt from you does it claim against the government for the share that remains unpaid.

This is worth holding onto before you sign anything. A loan backed by the scheme can be easier to get. It is not easier to owe, and nothing about the guarantee changes what happens if the business cannot pay. The instrument itself, including what it typically requires and how it ends, is set out on the finance instrument reference.