Interest rates and fees on the Growth Guarantee Scheme are set by the accredited lender, not the government. The scheme’s guarantee improves your access to finance but does not set, cap or subsidise the rate. Pricing depends on your business, the facility type and the lender, so the same business can receive very different quotes. Always compare the total cost of credit — interest plus all fees — across several accredited lenders rather than the headline rate alone.
Key takeaways
- Accredited lenders set the rate and fees — the scheme does not.
- The guarantee improves access, not price; it does not make borrowing automatically cheaper.
- Rates vary widely between lenders for the same business, so compare offers.
- Expect interest plus fees such as an arrangement fee, and product-specific charges on asset and invoice finance.
- Compare on total cost of credit over the full term, not the headline rate.
- Strong, current financials and competing quotes can secure better pricing.
One of the most common questions about the Growth Guarantee Scheme is simple: what will it cost? Many business owners assume that because the scheme is government-backed, it must carry a special low rate. It does not. The interest rate and fees are commercially set by the accredited lender, and the scheme’s real benefit lies in improving access to finance rather than reducing its price. This guide explains exactly how Growth Guarantee Scheme interest rates and fees work, what drives the rate you are offered, the fees to watch for, and how to compare the true cost so you can secure the best deal for your business.
Who sets the interest rate?
The rate is set by the accredited lender, not by the government or the British Business Bank. Under the scheme, the government provides the lender with a partial guarantee against the outstanding balance, which reduces the lender’s risk and encourages it to approve viable businesses. Crucially, that guarantee operates behind the scenes between the lender and the British Business Bank — it does not dictate, cap or subsidise the interest rate you pay. The finance is priced like ordinary commercial lending.
Does the guarantee make borrowing cheaper?
Not directly. It is a widespread misconception that government backing means a discounted rate. In reality, the scheme’s value is in access: it helps viable businesses obtain finance they might otherwise struggle to secure. For a strong, established business that could already borrow easily on commercial terms, a standard loan may be just as cheap — or cheaper — than a scheme-backed facility. The sensible approach is to compare both routes on cost rather than assuming the backed option wins.
Don’t assume “government-backed” means “lowest rate.” The guarantee improves your chances of approval, not the price. Always compare the total cost of credit.
What affects the rate you are offered?
Because pricing is commercial, your rate reflects the lender’s assessment of risk and the specifics of the facility. The main factors include:
- Trading history and turnover — established businesses with a solid track record generally price better.
- Profitability and cash flow — strong, consistent figures reduce perceived risk.
- Amount and term — the size and length of the facility affect pricing.
- Facility type — term loans, overdrafts, asset and invoice finance are priced differently.
- Security and guarantees — what, if anything, is offered as security.
- Credit profile — business and often personal credit history.
- Lender appetite — each lender has its own pricing model and target market.
Fixed or variable rates
Whether your rate is fixed or variable depends on the lender and the facility. Term loans are frequently offered at a fixed rate, giving predictable repayments across the term — useful for budgeting. Overdrafts and some revolving facilities are typically variable and may move with an underlying reference rate, so repayments can rise or fall. Before accepting any offer, confirm whether the rate is fixed or variable and, if variable, what it is linked to.
The fees to expect
Interest is only part of the cost. Depending on the lender and facility, you may encounter several fees:
| Fee | What it is |
|---|---|
| Arrangement / facility fee | A one-off charge to set up the facility, as a percentage or flat amount. |
| Service / management fee | An ongoing charge on some facilities, particularly invoice finance. |
| Documentation fee | Sometimes applied to asset finance agreements. |
| Early repayment charge | Charged by some lenders if you settle early (others allow penalty-free settlement). |
Always ask each lender for a full fee breakdown in writing so that you can compare offers on a like-for-like basis.
How to compare the true cost
The single most important habit is to compare the total cost of credit over the full term — the interest plus every fee — rather than the headline interest rate. Two accredited lenders offering the same scheme-backed product can present materially different total costs for the same business. A slightly higher rate with no arrangement fee may cost less overall than a lower rate with a large fee. Alongside cost, weigh the term, repayment flexibility and any security required, because the cheapest option is not always the best fit.
Worked example
An established wholesaler with three years’ trading wants to borrow £100,000 over five years to fund expansion. Lender A offers 11.5% with a 2% arrangement fee; Lender B offers 12% with no fee. On the headline rate, Lender A looks cheaper, but once the £2,000 fee and the repayment schedules are compared over the full term, the two are much closer than they first appear — and Lender B also allows penalty-free early settlement, which matters because the business expects to repay ahead of schedule. By comparing total cost and terms rather than headline rates, the wholesaler chooses the offer that genuinely costs less for its plans.
Can you negotiate?
There is often room to negotiate, especially if your financials are strong or you hold competing offers. A well-prepared application — current accounts, management figures and a clear funding purpose — strengthens your hand, and competition between accredited lenders works in your favour. A commercial finance broker who knows the accredited-lender market can help identify the best-fit lenders and push for better terms, which can outweigh any broker fee.
Tax treatment
Interest on borrowing used wholly for business purposes is generally an allowable expense, and the fact that a loan is government-backed does not change its tax treatment. The detail — including how particular fees are treated — depends on your circumstances, so confirm the position with your accountant when planning the true net cost of the facility.
The bottom line
Growth Guarantee Scheme interest rates and fees are set commercially by accredited lenders, not by the government, and the guarantee improves access rather than price. Because rates and fees vary widely, the businesses that get the best deals are those that prepare strong applications, gather several quotes and compare the total cost of credit over the full term. Treat the scheme as a route to funding you might otherwise struggle to access — and shop around exactly as you would for any commercial finance to make sure the cost works for your business.
Frequently asked questions
Who sets the interest rate on a Growth Guarantee Scheme loan?
The accredited lender sets the interest rate, not the government and not the British Business Bank. The scheme provides the lender with a partial guarantee against the outstanding balance, but it does not dictate the rate. As a result, rates vary considerably between accredited lenders for the same business, which is why comparison matters.
Does the government guarantee make the rate cheaper?
Not directly. The guarantee improves your access to finance by reducing the lender’s risk, but it does not set or subsidise the interest rate. For a strong, established business, a standard commercial loan can sometimes be just as cheap or cheaper, so you should always compare the total cost of credit.
What is a typical interest rate under the Growth Guarantee Scheme?
There is no single rate. Pricing depends on the lender, the facility type (term loan, overdraft, asset or invoice finance), your trading history, financials and risk profile. Because rates are commercially set and change with the market, you should treat any quoted figure as indicative and request a personalised quote.
What affects the rate I am offered?
Key factors include your trading history and turnover, profitability and cash flow, the amount and term, the facility type, any security offered, your credit profile and the lender’s own appetite. A well-prepared, viable business with clear, current financials typically secures better pricing.
Are interest rates fixed or variable?
It depends on the lender and facility. Term loans are often offered at a fixed rate for predictable repayments, while overdrafts and some revolving facilities are usually variable and may move with a reference rate. Always check whether your rate is fixed or variable before accepting.
What fees should I expect?
Common fees include an arrangement (or facility) fee, and for some facilities a service or management fee. Asset and invoice finance can carry their own charges. There may be fees for changes or early repayment with some lenders. Ask each lender for a full breakdown so you can compare like with like.
Is there an arrangement fee on GGS finance?
Many lenders charge an arrangement fee, set as a percentage of the facility or a flat amount, though some do not. Because fees materially affect the total cost, you should include them in any comparison rather than focusing only on the headline interest rate.
Can I be charged for repaying early?
Some lenders apply an early repayment charge or recover a portion of unearned interest; others allow penalty-free early settlement. The position varies by lender and facility, so if you may repay early, confirm the early-repayment terms before signing.
How do I compare the true cost of two GGS offers?
Compare the total cost of credit over the full term — interest plus all fees — rather than headline rates alone. Two accredited lenders offering the same scheme can present very different total costs. Also weigh the term, repayment flexibility and any security required.
Is the interest tax-deductible?
Interest on borrowing used for business purposes is generally an allowable expense, but the treatment of fees and the detail of your situation should be confirmed with your accountant. Tax treatment does not change because the loan is government-backed.
Does the guarantee fee get passed to me?
Scheme costs are arranged between the lender and the British Business Bank. How a lender prices its facilities — including any internal costs — is reflected in the rate and fees it quotes you. What matters to you is the total cost of credit on the offer in front of you, so compare that.
Will a longer term reduce my interest rate?
Not usually. A longer term lowers each monthly repayment but typically increases the total interest paid over the life of the facility, because you borrow for longer. Choose a term that balances affordable repayments against total cost.
Can I negotiate the rate?
There can be room to negotiate, particularly if you have strong financials or competing offers. Presenting a well-prepared application and comparing multiple accredited lenders strengthens your position. A broker who knows the market can also help you secure better terms.
Why do rates vary so much between lenders?
Each accredited lender has its own cost of funds, risk appetite, target customers and pricing model. The same business can therefore receive materially different quotes. The guarantee reduces risk for all of them but does not standardise pricing, which is exactly why shopping around pays.
Does my credit profile affect the rate?
Yes. As with any commercial lending, your business (and often personal) credit profile feeds into the lender’s risk assessment and therefore your price. A clean record and strong financials tend to secure better rates; adverse history may raise the rate or limit options.
Are asset and invoice finance priced differently?
Yes. Asset finance is priced against the asset and term and may include documentation fees; invoice finance typically involves a service fee plus a discount charge on the funds advanced. When the scheme backs these facilities, the underlying pricing structure of each product still applies.
Should I choose the lowest rate automatically?
Not necessarily. The cheapest headline rate can come with higher fees, less flexibility or security requirements that do not suit you. Look at the total cost of credit and the terms as a whole, and pick the offer that best fits your needs, not just the lowest number.
Does a broker add to the cost?
A broker may charge a fee, but a good one can save you more than they cost by matching you to suitable accredited lenders and securing better terms. Always confirm any broker fee upfront and weigh it against the value of the comparison and access they provide.
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Get your free quoteThis article is general information, not financial advice. Eligibility, rates and terms vary by lender and your circumstances. The Loans Hub is a finance broker, not a lender.
