The Government and Chancellor Rachel Reeves have announced the biggest investment in small businesses for many years.
12,000 additional small to medium enterprises (SMEs) a year are set to receive support accessing finance as the Growth Guarantee Scheme is expanded.
In addition, £500m government funding has been allocated to back innovative SMEs and scale up initiatives, as well as new support for community lenders, finance for innovation and exporters, it said.
“Improving this access is key to unlocking greater business investment, growth and productivity…”
The Government said the gap between the SME demand for finance and the amount available is estimated to be between £1.6bn to £4.1bn a year. “Improving this access is key to unlocking greater business investment, growth and productivity across the UK,” it said.
The centrepiece of plans revealed today is an expansion of the British Business Bank’s (BBB) Growth Guarantee Scheme (GGS) which provides a 70% government guarantee on commercial loans to SMEs of up to £2m, cutting credit risks.
Since its launch in 2022, the scheme has delivered over £3.7bn of financing to UK SMEs with £2.5bn of this reaching businesses outside of London and the south east.
The changes will mean:
- The scheme will scale up to facilitate an additional £2bn of SME lending per year by 2028/29. This will bring the total SME lending supported through the scheme to £3.35bn per year - more than double the current £1.35 billion.
- Increasing the maximum term length of a loan from six to 10 years for loans of up to £1.1m.
- Increasing the maximum size of businesses that are eligible for a loan under the scheme from £45m in annual turnover to £54m.
- The BBB estimates these changes will support an additional 12,000 businesses per year by 2028/29, representing a 150% increase on the 8,000 currently being supported, bringing the total to 20,000.
Reeves (below left) said: “We know small businesses are the backbone of this economy and growth in all our regions, and for too long they’ve 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, added: “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.
“Today’s expansion of the scheme’s funding is the most significant step in years to unlock finance for Britain’s small businesses, with the further changes to the terms of the scheme improving the viability of guaranteed lending for firms who need longer term loans.”
In other news, the Government has also announced it’s “reaffirming its commitment to the community finance sector,” recognising the important role Community Development Finance Institutions (CDFIs) play in supporting businesses and entrepreneurs who may struggle to access mainstream finance.
In February, the Government launched the Community Finance Taskforce, bringing together banks, community finance lenders and government, to strengthen small business finance in partnership.
Martin McTague, national chair of the Federation of Small Businesses (FSB), said: “Access to finance is a fundamental need for small businesses looking to grow, so we’re 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.”
Independent retailers have also welcomed the plans. The British Independent Retailers Association (Bira), which works with over 6,000 independent retailers across the UK, said the move could help ease long-standing barriers to finance faced by the sector.
Andrew Goodacre (right), CEO of Bira, said: “We welcome the extra funding for this scheme and really hope it will increase the access to funding for independent retailers. I often hear that lenders consider the sector to be ‘high risk’, and this scheme should go some way to mitigating this risk.”
Goodacre also said independent retailers have often found it harder than larger competitors to secure finance from mainstream lenders, and that any measures which improve that access are a welcome step for the high street.
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