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• 30 Jan

  How To Increase Your Invoice Finance Prepayments Using The Growth Guarantee Scheme

  This post addresses how you can increase your invoice finance prepayments by using the Growth Guarantee Scheme. This method is offered by some of our panel of providers.

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  How To Increase Invoice Finance Prepayments Using The Growth Guarantee Scheme

  

  In my previous post about the Growth Guarantee Scheme (GGS), I focused on how the scheme can be used to provide business loans partly backed by a government guarantee. However, there is also an interesting application to invoice financing itself. GGS can be used to boost the funding levels from an invoice financing facility.

  Increasing Invoice Finance Prepayments Using GGS

  The GGS can be used to achieve a temporary uplift (needs to trade back down within 3 years max) in the prepayment levels of an invoice financing facility. This could be a great way of getting a temporary increase in funding levels to support situations such as acquisitions or large contracts.

  Understanding Invoice Finance Prepayments

  Invoice finance providers typically advance a percentage of outstanding invoices to businesses, with prepayment levels ranging from 70% to 90% (or even 100% minus fees in some cases) depending on risk assessments, industry sector, and debtor quality. Increasing this percentage can significantly boost a company’s liquidity, allowing it to meet operational expenses, invest in growth, or take advantage of new opportunities.

  Learn more about What Is A Prepayment?

  What Is the Growth Guarantee Scheme?

  The Growth Guarantee Scheme (GGS) is a government-backed initiative that enables lenders to provide more favourable credit terms to SMEs by offering lenders a partial government guarantee on eligible lending. This reduces their risk, allowing them to provide businesses with enhanced funding solutions.

  Read more about the Growth Guarantee Scheme.

  How the Growth Guarantee Scheme Can Increase Prepayments

  The GGS can increase prepayment levels as the invoice financiers have a partial government-backed guarantee on approved facilities. The maximum increase is a 30% uplift in prepayments which could represent a significant sum of money. If your existing provider is not accredited to offer GGS, it may be necessary to move to an alternative invoice finance that is approved to offer the scheme.

  A Worked Example Of How The GGS Increases Funding Levels

  For example, in a situation where a funder may offer say an 85% prepayment against invoices, they may be able to increase that to say 95% using the GGS. This additional percentage is traded back over an extended period of up to 3 years. This extended period makes the transition manageable without damaging your cash flow.

  If you were already using say £1M in prepayments with an 85% funding percentage, an uplift to a 95% prepayment level would release an additional c. £117K of new funding. This could be very helpful in the case of an acquisition or other form of investment in the development of your business.

  Eligibility Criteria for Businesses

  To benefit from increased invoice finance prepayments via the Growth Guarantee Scheme, businesses typically need to:

  • Have a turnover of up to £45M pa (considered on a group basis if part of a group).
  • Be UK-based and actively trading with more than 50% of its income from trading activity.
  • Have a viable business that is not experiencing difficulties and has a demonstrable ability to repay finance.
  • Meet the eligibility requirements set by participating funders and the scheme (there are some sectors that are excluded).
  • Funding against an element of certified applications for payment can be included in the arrangement for certain trades.

  Situations Where This Might Help

  There are several situations where increased prepayment levels may be helpful. These include but are not limited to:

  • Acquiring another business. See our Acquisition Guide.
  • Switching between providers to improve terms.
  • Having significant growth in orders or large contracts to finance.
  • Needing a deposit to purchase new machinery or vehicles such as trucks.

  Steps to Take Advantage of the Scheme

  These are the steps to take advantage of the scheme:

  • Check if your current invoice financier is accredited under GGS.
  • If not, speak to our specialist experts for an introduction to providers that can help. Call us on 03330 113622.

  Final Thoughts On Increasing Funding Levels Using GGS

  For businesses looking to maximise their cash flow through invoice finance, the Growth Guarantee Scheme presents a valuable opportunity. By reducing risk for lenders, it opens the door to higher prepayment percentages, allowing businesses to access more of their funds upfront. If your company relies on invoice finance, now is the time to explore whether this scheme can help you unlock additional working capital for growth.

  If you need assistance in finding the right invoice finance provider that can offer improved prepayment terms under the Growth Guarantee Scheme, get in touch with us today by calling 03330 113622.

  By Glenn Blackman