Issued by: HM Treasury

Tens of thousands of small businesses to receive a boost, as Chancellor Rachel Reeves announces most significant reforms to small business finance in years.

• 12,000 additional SMEs per year to receive support accessing finance as Growth Guarantee Scheme expanded significantly

• £500 million government funding allocated to back innovative SMEs and scale ups

• New support for community lenders, finance for innovation, and exporters

The changes will help businesses grow, invest and create jobs across the country, and come ahead of the Chancellor’s Mansion House speech on Tuesday. It delivers on the government’s commitment to make the UK the best place to start and grow a business – ensuring that hard work and ambition are met with the finance to match.

The gap between the SME demand for finance and the amount available is estimated to be between £1.6 billion to £4.1 billion per year. Improving this access is key to unlocking greater business investment, growth and productivity across the UK.

The centrepiece of plans revealed today is an expansion of the British Business Bank’s (BBB) highly successful Growth Guarantee Scheme (GGS) which provides a 70% government guarantee on commercial loans to SMEs of up to £2 million, cutting credit risk and turning ‘nos’ into ‘yeses’.

Since its launch in 2022, the scheme has delivered over £3.7 billion of financing to UK SMEs with £2.5 billion of this reaching businesses outside of London and the Southeast.

Every £1 spent on the scheme is estimated to support around £10 of lending by banks.

Expansion of the scheme has been one of the key priorities of SME trade bodies and the financial services sector ahead of Mansion House, and this government has listened to these calls and acted. The changes will mean;

• The scheme will scale up to facilitate an additional £2 billion of SME lending per year by 2028/29. This will bring the total SME lending supported through the scheme to £3.35 billion 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 £1.1 million.

• Increasing the maximum size of businesses that are eligible for a loan under the scheme from £45 million in annual turnover to £54 million.

• The BBB estimates these changes will support an additional 12,000 businesses per year by 2028/29, a 150% increase on the 8,000 currently being supported, bringing the total to 20,000.

Chancellor of the Exchequer, 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.

"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."

ENABLE Guarantees to support innovation

Beyond the expansion of GGS, the BBB has also allocated £500 million of the financial capacity within its ENABLE Guarantee programme to unlock lending to SMEs and scaling firms that are rich with innovative intellectual property (IP).

IP-rich SMEs often find it difficult to access finance than firms with physical assets such as property, and the new allocation will support innovative, high-growth firms across sectors such as creative industries and life sciences to secure the finance they need to commercialise ideas, invest and scale.

This will strengthen the UK’s innovation ecosystem and help boost the UK’s AI sovereignty, a key tenet to achieve growth set out by the Chancellor in her Mais lecture earlier this year.

Strengthening community finance and support for underserved businesses

The government is also 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. This is already bearing fruit, and supporters, including JPMorganChase, have now committed a total of £10 million of philanthropic funding, alongside financial support from the US bank BNY, to build the operational capacity of the community finance sector.

The Taskforce will publish a Roadmap early next year, setting out a clear plan to strengthen funding for community development financial institutions (CDFIs), their resources and capability, and signposting small businesses that had been turned down for credit to potential CDFI lenders. Collectively, these efforts seek to unlock an additional £1 billion of SME lending over the next five years, accelerating the growth of a vital sector supporting businesses across the UK.

Significant progress has also been made through the British Business Bank’s Community ENABLE Funding programme, with seven CDFIs accredited and nearly £120 million of government funds already committed to community finance lenders. A second phase of the programme will open later this year, with the ambition of crowding in private capital and scaling support for the sector substantially over time, to grow the programme to at least £500 million.

New export finance support for smaller businesses

Today’s reforms also include a new portfolio guarantee scheme delivered jointly by UK Export Finance and the British Business Bank, and designed to increase the availability of finance for small and medium-sized businesses.

Launching in spring next year, the scheme will help firms access lending to support export activity and expand into international markets, strengthening the UK’s exporting base and supporting long-term economic growth.

Supporting the wider SME finance ecosystem

Alongside today’s announcements, the government is also pledging other key steps to support the wider SME finance ecosystem:

• One year on from the launch of the Business Growth Service, supporting 750,000 users to date, the Business Growth Service will enter its next phase of development to build out digital business support. This includes launching a financial readiness programme – working with industry stakeholders and public institutions to shape how best to bring together financial education, Business Academy content, roadshows and access-to-finance support into a more coherent offer for SMEs, informed by user research and intelligence about what businesses need.

• The government intends to accelerate the development of Open Finance in the UK, with an initial focus on SME lending. The government will consult in 2027 on how best to deliver and harness the benefits of Open Finance in the UK.

• The government will remove barriers in legislation for building societies who want to lend to SMEs.

• The government has published its review of ring-fencing, setting out a comprehensive package of reforms which will unlock financing for scale-up firms, including through a ‘New Growth Allowance’. The government will publish its formal consultation on these proposals as part of the Chancellor’s Mansion House Speech.

Paul Thwaite, CEO NatWest Group, said:

"We welcome the changes announced today. As the UK’s biggest bank for business, this will allow us to deepen our support for firms, lending in the region of £1bn through the Government Guarantee Scheme over the next three years."

Amanda Murphy, CEO Business and Commercial Banking, Lloyds Banking Group, said:

"Lloyds Banking Group welcomes the planned expansion of the Growth Guarantee Scheme. With these changes, the scheme could enable us to provide up to £1 billion of lending by 2029, helping to support more businesses that may not otherwise have been able to access finance. We have already committed to provide £35 billion of new finance to businesses across the UK this year, including £9.5 billion for SMEs, helping businesses across the UK invest for the future, create jobs and drive growth in their local economies."

Matt Hammerstein, Chief Executive of the UK Corporate Bank said:

"We welcome the Chancellor’s announcement. We see the vital role access to finance plays in helping businesses grow in interactions with clients every day. Barclays’ Business Prosperity Index consistently shows that UK firms are ambitious to invest and expand, notwithstanding the uncertainty in which they operate.

"Through our £22 billion Business Prosperity Fund, we are helping businesses access the capital and expert support required to turn that ambition into growth. We are excited to combine that with today’s measures to unlock even more investment, boost productivity, further and support long-term economic growth across the UK.”

John Baldwin, CEO, Corporate and Commercial Banking, Santander UK, said:

"We welcome HM Treasury’s proposals to invest further in the Growth Guarantee Scheme (GGS), demonstrating its continued commitment to supporting UK SMEs. Access to finance remains a critical enabler of growth, and schemes such as the GGS play an important role in helping businesses invest, innovate and create jobs.

"We look forward to continuing to work closely with the Government and the British Business Bank to help drive sustainable growth across the UK."

Stuart Tait, Head of Commercial Banking, HSBC UK, said:

"We welcome the expansion of the Growth Guarantee Scheme and further support for exporters and innovative firms, all of which will help more small businesses around the UK access finance for growth. We will be ready to support more lending to customers as a result of these measures. HSBC UK is committed to providing SMEs with the finance, tools and confidence they need to grow their business. Last year, we made an additional £5 billion of lending available to UK SMEs until 2030 while our Small Business Growth Programme has reached over two million SMEs in the last year, providing free training, events and insights."

Conor Hillery, Co-CEO of EMEA at JPMorganChase, said:

"Small businesses drive the UK economy, but too many entrepreneurs struggle to access the finance they need to grow. Building on more than two decades of experience supporting CDFIs in the US, and reinforcing our commitment to expanding access to finance in the UK, we’re announcing a total £10 million in philanthropic funding to strengthen CDFIs’ technology, leadership and operations—helping them attract more capital, increase lending and reach more underserved communities.

"JPMorganChase is proud to be part of the Community Finance Taskforce, bringing together the government, finance industry, and the social sector to help build a more inclusive small business finance market that supports lasting economic growth."

Richard Davies, CEO of Allica Bank, said:

"We are delighted the Chancellor has backed Britain’s smaller businesses by supporting lenders like Allica to supercharge its growth lending to businesses.

"Allica plans to deliver over £8 billion of new SME lending over the next 3 years, and the substantial expansion to the GGS and Enable schemes will play a vital part in enabling this additional lending.

"An expanded GGS will drive economic growth right across Britain, with four in every five jobs supported by Allica’s GGS lending located outside London and the South East."

Irene Graham OBE, CEO, ScaleUp Institute, said:

"Today’s announcement of the expansion of the British Business Bank’s Growth Guarantee Scheme and ENABLE Programme, alongside a new package of services delivered jointly by UK Export Finance and the British Business Bank, represents a welcome package of support for innovative scaling companies seeking to expand internationally and grow their exports."

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 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."

Shevaun Haviland, Director General of the British Chambers of Commerce, said:

"The Growth Guarantee Scheme has played a vital role in funnelling more money into our regional economies and helping SMEs across the UK to invest and grow.

"For too long we have lagged behind other G7 economies on access to finance and this new funding will bring us a step closer to parity. Our research shows that almost half of businesses think easier access to finance will support their expansion.

"But it’s important that we do not stop here, it we want to help make the UK the best place to start and grow a business."

David Postings, Chief Executive, UKFinance 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."

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