£500m pledged for small businesses affected by tariffs

There may be hope for UK businesses amid President Trump’s trade war, thanks to a government-backed financing scheme worth billions.

On Sunday, a new package was announced that will enable UK Export Finance (UKEF) to provide £20bn in financing support for firms affected by inflated US tariffs. 

As part of the package, the British Business Bank (BBB)’s will allow eligible small businesses to borrow up to £2m through its Growth Guarantee Scheme (GGS).

The extra funding may be especially beneficial for those who supply retailers, healthcare firms, and car manufacturers; three sectors hit hard by Trump’s tariffs.

Below, we’ll provide a detailed explanation of the funding, including eligibility criteria and application instructions.

What is the Growth Guarantee Scheme?

In case you missed it, Trump sent the global stock market into turmoil by imposing a minimum 10% tariff on all US imports on what he called “Liberation Day”, on April 2.

The move was met with widespread outrage. China was hit with one of the highest tariffs but struck back by ordering retaliatory tariffs for the US of 125%. The ongoing chaos resulted in a global market downturn and realistic fears of a recession. 

After days of uncertainty, Trump was the first to break, by announcing a 90-day pause for countries affected by the tariffs on April 10. All countries, including the UK, will now pay a 10% “universal tariff” on all goods exported to the US. In addition, certain tech and electronics products will be exempt from tariffs. This decision has encouraged stock markets to rise, including the UK-based FTSE 100.

That said, UK businesses exporting goods to the US will still feel a pinch. On Sunday, the Government began encouraging affected small businesses to apply for the new funding from the Growth Guarantee Scheme, to help with cash flow issues.

Chancellor Rachel Reeves announced the scheme, saying, “The world is changing, which is why it is more important than ever to back our world-leading businesses and support them to navigate the challenges ahead.”

The new package offers a total of £500m in additional lending capacity, with businesses able to borrow up to £2m per business group. 

The funds can be used to mitigate disruption caused by the tariffs, such as managing cash flow. Terms vary from three months to up to six years.

Are you eligible?

Full eligibility rules have not yet been announced for the new funds, although the BBB has said it will release further information on the initiative soon.

However, here are general requirements that small businesses applying to the Growth Guarantee Scheme must fulfil:

• Your business must have a turnover of no more than £45m, including business groups
• You must be UK-based and generate more than 50% of your income from trading activity unless you are a charity or further education institution
• You should not be in real financial difficulty, such as undergoing insolvency proceedings
• You may need to provide written confirmation that receiving the GGS will not mean that your business exceeds the maximum subsidy you are allowed to receive

It’s also important to consider whether receiving financial help is a sensible decision for your business at this time. The GGS is, after all, a type of debt finance, which is much less affordable during an economic downturn. 

As the UK faces higher interest rates and tighter lending conditions, SMEs are reportedly repaying debt at levels more than 20 times higher than pre-COVID. So, think carefully before taking on extra debt. Even if loans provide breathing room in the short term, they can place undue financial pressure on your business in the long run. 

How to apply

If you’d like to secure financing provided by the Growth Guarantee Scheme, you should approach a GGS-accredited lender to apply. You can go to their website to submit an application, then the lender will independently review your eligibility. To support your application, you’ll need to provide details of:

• Management accounts
• Business plan
• Historic accounts
• Details of assets
• Details of previous subsidy awards

If it transpires that you don’t qualify for the tariff aid, there are other options available to support your profit margins. 

Alternative funding sources for SMEs include small business grants, advisory services, and other forms of government assistance which can help your business thrive despite the adverse economic climate.