Refinancing a Covid loan through the Growth Guarantee Scheme

The Growth Guarantee Scheme is now open until March 2030, and it can be used to refinance a maturing CBILS, RLS or Bounce Back facility. For some borrowers, particularly those whose credit story is still recovering, that route is the right one. For a company with improving EBITDA and a clean balance sheet entering the 2026 maturity window, the commercial market is broad and competitive without the scheme overhead. The guarantee is a tool for the marginal credit, not a default for the median one.

What is the Growth Guarantee Scheme and who is it for?

The GGS is the current iteration of the government’s lending guarantee programme, extended at the 2025 Spending Review through to 31 March 2030. It carries a 70% government guarantee (down from the 80% that applied under CBILS and the early Recovery Loan Scheme iterations) on facilities up to £2m for businesses with turnover up to £45m. Accredited lenders, from the banks to a growing list of non-bank providers, offer GGS-backed term loans, revolving facilities and asset finance.

The guarantee is not automatic approval. Each lender runs its own credit assessment and the business must demonstrate a viable trading position. What the guarantee does is shift some of the lender’s downside risk onto the government, which typically allows them to lend to a borrower they might otherwise decline, or to lend more than they would on an unguaranteed basis. It is a credit-extension tool for the harder credit, not a pricing gift for the easy one.

The Recovery Loan Scheme (RLS, Apr 2021 – Jun 2024) preceded the GGS. By the end of 2024, the BBB reported that RLS iterations 1 and 2 had drawn down £4.33bn across 20,070 facilities, with 18.7% of those facilities resulting in a settled guarantee claim by volume, reflecting the smaller-ticket, higher-risk borrowers the scheme was designed to reach.

What does the CBILS repayment picture say?

CBILS (£25.8bn, roughly 109,000 facilities) was drawn overwhelmingly in 2020 on standard six-year terms. By March 2025, just under half of CBILS facilities by volume had been fully repaid: the stronger credits that repaid early, or refinanced, on their own terms. Around 41% of facilities were still running to schedule. Settled claims, the measure of realised government guarantee payouts, stood at just under 9% of CBILS facilities, lower than the RLS rate. That gap reflects the higher-quality mid-market borrower the 80%-guaranteed CBILS attracted compared with the mass-market Bounce Back Scheme.

The Bounce Back Loan Scheme picture is more instructive for understanding where the maturity pressure concentrates. BBLS was a larger programme (£46.5bn, roughly 1.5 million facilities) and was drawn by a far wider range of businesses. As 2020-vintage six-year terms approach their contractual end, the settled-claims rate has risen steadily. By March 2025 it had reached just under 25% of facilities by volume: roughly one in four Bounce Back loans had resulted in a government payout after default.

How should a CFO choose between the scheme and the commercial market?

The question is not whether the business can access GGS but whether it should. The answer turns on the credit story it can tell without the guarantee.

A business with two or more years of growing EBITDA, a leverage ratio below 3x and a clear debt-service track record is a conventional credit. Debt funds, challenger banks and specialist lenders compete actively for that profile without a guarantee. The commercial market for this type of credit is broad: multiple lender types, covenant flexibility, longer tenors, and accordion structures that accommodate acquisition activity are all available to borrowers who qualify. Tying the facility to a guaranteed scheme limits the lender pool to accredited providers, which reduces the scope of that competitive process.

A business with a more variable earnings history, a sector that lenders are cautious about, or a legacy of the pandemic years is a different case: disrupted trading, a revised business plan, a founder who took the full Bounce Back allowance and has not fully deleveraged. For those credits the GGS guarantee is doing the job it was designed for: opening a door that would otherwise stay closed, or enabling a larger facility than an unguaranteed lender would extend.

The practical approach is to run both options simultaneously. Instruct an adviser to approach the commercial market while also identifying accredited GGS lenders. Let the terms come back before deciding. This does two things: it tells you whether the commercial market wants the credit (which is itself useful information), and it gives the GGS lenders a competitive reference point. A borrower who has tested both sides arrives at the decision with full market information rather than defaulting to whichever option is nearest at hand.

The timeline matters as much as the route. A business with a CBILS facility maturing in the first half of 2026 should be starting the process now, in September 2025. Twelve to eighteen months’ runway is enough to run a competitive process, give lenders time for proper diligence, and still hold the option to wait for better terms if the first offers are not right. Compress that to the quarter before maturity and none of those options remain.