Can I combine lender finance with grants or government support (eg, SFI, Growth Guarantee Scheme)?

Short answer: Yes — and here’s how to do it safely and effectively

Yes, UK businesses can often combine commercial lending with grants or government support, provided you avoid double funding the same costs and meet each scheme’s rules. Lenders will usually accept grants as part of a project’s funding mix, and the UK’s Growth Guarantee Scheme (GGS) can also sit alongside grants, subject to eligibility. If you’re in agriculture, Sustainable Farming Incentive (SFI) payments can be combined with finance for complementary investments, as long as you comply with Defra guidance.

The right approach is called “blended finance”: using a grant to reduce the amount you need to borrow, and a loan, asset finance or invoice facility to fund the rest. Below we explain how lenders view grants, common pitfalls, steps to structure your application, and examples by sector.

How grants and government‑backed finance can work together

What lenders consider when you have a grant

Lenders typically like grants because they reduce project risk and the loan size needed. They’ll want to see grant offer letters, conditions, timelines, and drawdown rules to make sure your cash flow can support repayments. If a grant is not yet approved, lenders may issue a conditional offer subject to proof of award.

Most grants prohibit using funds for financing costs (interest, fees, or refinancing), and they usually require you to spend grant money on eligible items only. Lenders assess whether the project still stands if a grant is delayed or reduced, and may structure staged drawdowns to match grant milestones.

Growth Guarantee Scheme (GGS) at a glance

The GGS is administered by the British Business Bank and provides a government guarantee to accredited lenders, which can enhance access to finance for eligible UK businesses. Facilities can include term loans, overdrafts, asset finance and invoice finance from participating providers. The borrower always remains liable for 100% of the debt.

GGS can sit alongside grants if the total package meets scheme rules, the lender’s affordability checks, and subsidy control requirements. Terms, facility sizes and eligibility are set by accredited lenders and may change, so always check the latest British Business Bank guidance before applying.

Important: The borrower remains fully liable

Even when a facility is supported under GGS, you are 100% liable for repayments and costs. The government guarantee supports the lender’s risk management; it is not a grant to your business and does not remove your repayment obligations.

SFI and sector‑specific support in agriculture

Can SFI be combined with loans or asset finance?

Yes, many farms use SFI income as part of their ongoing cash flow while financing complementary investments such as machinery, precision ag tech, or energy efficiency upgrades. The key is making sure you’re not claiming SFI for the same costs that you intend to fund with a grant, and that you’re not using another public grant for the same eligible item twice.

Where you use a separate capital grant (for example, through Defra or a local programme) together with a loan or asset finance, ensure procurement, match funding and spend evidence align with the grant’s rules. Always keep a clean audit trail, with invoices clearly allocated to the correct funding source.

Typical do’s and don’ts for SFI combinations

Do combine SFI revenue payments with commercial finance for related but distinct investments.
Don’t use any grant funds to pay interest, lender fees or refinance existing borrowing, unless a scheme explicitly allows it.
Do keep documentation for supplier quotes, competitive procurement (if required), and outcome reporting.
Don’t double fund the same item via multiple public sources.

If you’re exploring finance for farm machinery, sheds, renewables or vehicles, see our guide to agriculture business loans for typical options and considerations.

Practical steps to structure a blended funding package

A simple 7‑step plan

Define the project and costs: Scope the items, timelines, suppliers, and total budget including VAT treatment.
Identify grant fit: Check eligibility, match funding ratio, procurement rules, and reporting obligations for the most suitable grant.
Sequence applications: Where possible, secure the grant offer first, then finalise your finance so both timelines and conditions align.
Choose the finance type: For equipment, asset finance may be best; for working capital, consider invoice finance or a revolving facility; for broader investment, a term loan.
Prepare evidence: Provide the lender with the grant offer letter, project plan, management accounts, and cash flow forecasts showing affordability.
Match drawdowns: Align lender drawdowns with grant milestones to reduce bridging risk and limit interest on undrawn funds.
Track and report: Keep meticulous records of spend, outputs and claims to satisfy both the grant body and the lender.

This process helps you demonstrate control, compliance and repayment capacity, all of which improve lender confidence. It also reduces the risk of delays or rework due to documentation gaps.

Documents you’ll usually need

Grant application and offer letter including conditions, eligible costs and claim schedule.
Supplier quotes, purchase orders, and procurement evidence where required.
Latest filed accounts, current management accounts, aged debtor/creditor lists where relevant.
Cash flow forecast showing loan affordability and the timing of grant claims.
Business plan or project impact summary (productivity, sustainability, jobs, ROI).

Common pitfalls, subsidy control, and compliance

UK Subsidy Control and Minimal Financial Assistance (MFA)

Public funding in the UK is governed by the Subsidy Control Act 2022. Many small awards are covered by Minimal Financial Assistance (MFA), which has an upper threshold across a rolling period. Businesses must track public support received to avoid breaching thresholds or scheme caps.

Agriculture, fisheries, and certain sectors have specific rules and lower limits under particular schemes. Always disclose prior public support in grant and lender applications to ensure compliance and avoid later clawback.

What you cannot usually use grant money for

Most business grants cannot be used to pay interest, arrangement fees, deposit contributions on finance, taxes, fines, or to refinance existing borrowing. Many schemes will not fund pre-approval expenditure or retrospective purchases unless explicitly allowed.

If you’re unsure, ask the grant provider for written clarification before committing to a supplier or finance agreement. Lenders also prefer clarity to ensure correct allocation of funds and evidence for your file.

Timing, VAT and procurement caveats

Timing: Do not start the project or place orders before grant approval if the scheme prohibits it.
VAT: Grants often exclude VAT unless you are not VAT-registered or VAT is irrecoverable for the item.
Procurement: Many grants require competitive quotes or tendering to demonstrate value for money.

Failure to follow these rules can lead to claim rejections or clawback, which can impact your cash flow and loan covenants. Good governance is part of making blended finance work smoothly.

Example scenarios and how we help

Scenario 1: Manufacturing productivity grant + asset finance

A Midlands manufacturer secures a 30% capital grant for CNC machinery. They fund the remaining 70% via asset finance over 5 years, aligning repayments with productivity gains and cost savings.

The lender sizes the facility net of the grant and conditions drawdown on a copy of the grant approval. The grant provider reimburses claims after proof of delivery, with the business managing cash flow via staged supplier payments.

Scenario 2: Farm SFI income + equipment loan

An arable farm participates in SFI actions that improve soil health and biodiversity, generating a steady revenue stream. The farm then takes a term loan for variable-rate irrigation upgrades, clearly separating eligible SFI activities from capital investment funded by the loan.

Cash flow forecasts include SFI receipts as revenue, not as part of capital costs. The lender tests affordability on conservative assumptions, and the farm retains contingency for seasonal variance.

How Best Business Loans supports your journey

Best Business Loans is an independent introducer. We don’t lend or give regulated advice — we help you identify suitable lenders and brokers for your needs and sector, including providers active with grants, SFI-linked projects, or GGS-accredited facilities.

Our AI-driven matching helps you save time, avoid mismatched criteria, and connect with finance providers who understand blended funding. It’s quick, secure and free to submit an enquiry for a Quick Quote, Decision in Principle or Eligibility check.

Key takeaways

You can combine loans, asset or invoice finance with grants and SFI, provided you do not double fund the same costs.
GGS-backed facilities can sit alongside grants, subject to lender eligibility and scheme rules.
Prepare offer letters, procurement evidence and a clear cash flow forecast to support your case.
Watch Subsidy Control/MFA limits and common grant exclusions like interest and fees.
Sequence applications and align drawdowns with grant milestones to manage risk.

Quick FAQs

Can I use a grant as the deposit on asset finance?

Generally no — most grants do not allow funds to pay financing deposits, interest or fees. You can reduce the financed amount by applying the grant to eligible equipment costs, subject to scheme rules.

Does a grant guarantee I’ll be approved for a loan?

No. Lenders still assess affordability, credit profile, security and management capability. A grant can help, but approval is never guaranteed.

Can I combine SFI with a local authority growth grant?

Yes, if each supports different activities and you do not claim twice for the same item or outcome. Always disclose all public support and keep a robust audit trail.

Can the Growth Guarantee Scheme cover my grant-funded project?

Potentially, if your chosen accredited lender agrees and the facility meets GGS rules. The borrower remains liable for 100% of the debt.

What happens if a grant payment is delayed?

Maintain contingency in your cash flow and speak to your lender early. Staged drawdowns, invoice finance, or a revolving facility can help bridge timing gaps in some cases.

Important information and fair‑clear‑not‑misleading notice

Best Business Loans operates as an independent introducer for UK businesses. We do not directly provide credit, we are not a lender, and we do not give regulated financial advice. All funding is subject to eligibility, status, provider criteria and terms; fees and rates vary and may change.

Nothing on this page constitutes a recommendation or guarantee of approval. Always read scheme rules (for example, British Business Bank guidance for GGS and Defra guidance for SFI) and consider seeking professional advice where appropriate. Promotions are intended to be fair, clear and not misleading to help you make informed decisions.

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About Best Business Loans

BestBusinessLoans.ai helps established UK companies find suitable commercial finance providers using intelligent data matching and a trusted network of lenders and brokers. We support sectors including manufacturing, logistics, healthcare, construction, and agriculture.

Updated: 27 October 2025