, which provides a 70% government guarantee on loans to small and medium-sized businesses of up to £2 million, is to be extended.){kind=link}
The Growth Guarantee Scheme (GGS), which provides a 70% government guarantee on loans to small and medium-sized businesses of up to £2 million, is to be extended.
Launched in 2024 as a successor to the pandemic-era Recovery Loan Scheme, GGS has provided £3.7 billion of finance to 8,000 SMEs.
GGS aims to provide greater certainty over credit risk, enabling lenders to provide debt finance to more viable SMEs that they wouldn’t otherwise consider.
In her Mansion House speech on Tuesday, chancellor Rachel Reeves will announce that an additional £2 billion will be provided per year by 2028/29. It will bring the total SME lending supported through the scheme to £3.35 billion per year, up from the current £1.35bn. The British Business Bank (BBB) estimates it will help 33,000 businesses.
In other changes to GGS, the maximum term length of a loan will be increased from six to 10 years for loans of up to £1.1 million, and the maximum size of businesses that are eligible for a loan will rise from £45 million in annual turnover to £54 million.
Other SME funding announcements
ENABLE Guarantee programme
BBB has allocated £500 million through the ENABLE Guarantee programme to provide funding to SMEs that are rich with innovative intellectual property (IP) over the next 12 months.
SMEs with significant value in IP, including intangible assets such as patents, trademarks, software, often find it more difficult to access finance than firms with physical assets which lenders traditionally rely on. The government said the scheme will help businesses in sectors such as the creative industries and life sciences to to commercialise ideas.
New export finance support
UK Export Finance (UKEF) and BBB will launch a new scheme in spring 2027 to support what UKEF estimates are thousands of smaller businesses with export ambitions that struggle to secure finance.
UKEF will provide a guarantee on a portion of eligible portfolio-level losses, with lenders retaining a share of risk, while the BBB will assess, onboard and manage commercial lenders participating in the scheme. The portfolio guarantee is designed to reduce lender costs and enable scalable lending to smaller business exporters.
Community finance
The Growth Guarantee Scheme uplift will support the expansion of community lending to underserved smaller businesses through the BBB’s Community ENABLE Funding Programme (CEF). BBB said the scheme is “on track” to reach its target of at least £150 million for community development finance istitutions (CDFIs) by the end of the current financial year.
CDFIs help businesses and entrepreneurs who struggle to access mainstream finance.
BBB has announced SWIG Finance as the seventh accredited lender for CEF, with an allocation of £17.5 million for smaller businesses in the South West of England.
The government’s Community Finance Taskforce will publish a “roadmap” early next year for strengthening funding for community development financial institutions (CDFIs) which help businesses and entrepreneurs who struggle to access mainstream finance.
The new plan will aim to provide an additional £1 billion of SME lending over the next five years.
Business Growth Service
The government’s Business Growth Service, launched last July as part of the government’s small business plan, will set up a financial readiness programme as “a more coherent offer for SMEs, informed by user research and intelligence about what businesses need”.
Open finance
The government will consult in 2027 on how best to deliver and access the benefits of open finance in the UK.
Building societies
The government will look to remove barriers in legislation for building societies who wanting to lend to SMEs.
Bank ring-fencing
In May, the government published its review of relaxing the ring-fencing rules for banks, which were introduced in 2019 to separate retail banking activities from riskier investment banking activities.
The review set out reforms to “unlock financing for scale-up firms”, including through a new “growth allowance”. The government will publish a consultation on the proposals as part of the chancellor’s Mansion House Speech.
Chancellor Rachel Reeves, said:
“Our plan for the economy has put Britain on a stronger footing – restoring stability, getting investment flowing, and delivering reform.
“We know that small businesses are the backbone of this economy and growth in all our regions, and for too long they have heard ‘no’ when trying to raise the funds they need to grow and create jobs across the UK.
“When they succeed, we all succeed, and today’s major reforms are the most significant step in years to unleash their potential.”
Business secretary Peter Kyle said:
“Today we’re putting our weight behind Britain’s entrepreneurs and innovators, unlocking billions in additional lending to help thousands more small businesses start, scale and succeed because access to finance should never be the barrier between a good idea becoming a great British business.”
Louis Taylor, CEO, British Business Bank, said:
“This growth package is great news for smaller businesses across the UK. The British Business Bank’s Growth Guarantee Scheme has a strong track record of enabling business growth, and the additional capacity and greater flexibility provided will help even more businesses, including those served by community lenders, to invest, grow and create additional jobs.
“It is great to be collaborating with UK Export Finance to help smaller businesses to export. This has the potential to transform UK economic performance and international competitiveness.
“Both these schemes, alongside the additional support for IP-rich businesses, will make a real difference on the ground, providing the finance needed for UK smaller businesses to realise their full potential.”
Kanishka Narayan, minister for AI and intellectual property, said:
“Intellectual property is one of the most valuable but underleveraged assets on a company’s balance sheet. In recent years we’ve seen a shift from possibility to practical reality as lenders experiment with new intellectual property loan products.
“The British Business Bank’s commitment offers the opportunity to go even further – helping to shift intellectual property-backed finance from the margins to the mainstream.”
Tim Reid, CEO, UK Export Finance, said:
“UK Export Finance exists to ensure no viable UK export fails for lack of finance, and this new joint scheme with the British Business Bank is a significant step towards furthering this mission.
“One of our main business priorities is to make it easier than ever for SMEs to harness the power of international markets. By combining access to finance, digital services and targeted support with the British Business Bank’s expertise in unlocking lending, we can support a new generation of exporters.”
Martin McTague, national chair, Federation of Small Businesses, said:
“Access to finance is a fundamental need for small businesses looking to grow, so we are pleased to see our calls to amp up the British Business Bank’s Growth Guarantee scheme have been heard. Expanding resources and extending payment terms will help small businesses build wealth in every part of the country.
“Small firms need as many finance options available to them as possible right now. Removing the barriers which currently restrict building societies’ loans to small firms, and widening export finance to include a portfolio guarantee, will help ambitious businesses and entrepreneurs enter new markets, and grow and succeed. Altogether, the package of reforms announced will help small businesses to fund their dreams of expansion, helping to nurture economic growth across the UK.”
Polly Dhaliwal, COO, Enterprise Nation, said:
“Every founder remembers the first time a bank said no. It knocks confidence, and many never ask again. So more than doubling the lending backed by the Growth Guarantee Scheme means something real. Thousands more will hear yes when they ask for the money to grow.
“Our own research shows demand is there but fragile. While 40% of the founders in our community say they plan to seek outside finance in the next 12 months, two thirds of aspiring entrepreneurs do not know government-backed support exists. Today’s announcement will only deliver if it reaches them.
“Encouragingly, this money reaches well beyond the big cities. Two thirds of the scheme’s lending so far has gone to businesses outside London and the South East, and the new backing for community lenders aims to unlock £1 billion more for founders who struggle to access mainstream finance.
“Finance works best when it is paired with practical support, local networks and trusted advice. That is why the new financial readiness programme in the Business Growth Service will be key. Evidence from the CFIT coalition we contributed to shows helping firms get finance-ready before they apply could unlock a further £5 billion of lending a year. We look forward to helping government make it work.”
David Postings, CEO, UK Finance, said:
“The expansion of the Growth Guarantee Scheme, alongside the wider support for innovative firms and exporters, is very welcome news and reflects calls made by UK Finance and our members. It demonstrates a clear commitment from the government to improving access to finance and will materially benefit small and medium sized businesses up and down the country. These businesses are vital to the UK economy, and the changes will unlock billions in additional lending capacity to support their growth.”
Theodora Hadjimichael, CEO, Responsible Finance, said:
“Many great businesses struggle to get the funding they need, so community development finance institutions are a lifeline. They have a long history helping businesses to grow and create jobs but have not always been able to meet demand.
“GGS and the Community ENABLE Funding programme are fundamental to enabling our lending, and this fantastic news will mean CDFIs can support more small businesses, so entrepreneurs can get the right finance at the right time and grow economies across the UK.”