UK unlocks billions in SME finance as Growth Guarantee Scheme doubles

The UK government has announced a major expansion of the British Business Bank’s Growth Guarantee Scheme, aiming to unlock an additional £2bn of lending a year for small and medium-sized businesses by 2028/29.

The scheme provides participating lenders with a 70% government guarantee on eligible commercial loans of up to £2m. Under the expansion, total annual lending supported through the programme is expected to rise from £1.35bn to £3.35bn.

The British Business Bank estimates that the changes will support an additional 12,000 businesses a year by 2028/29, taking the total number of SMEs receiving finance through the scheme to around 20,000 annually.

Eligibility will also be widened. The maximum turnover threshold for participating businesses will increase from £45m to £54m, while the maximum term for loans of up to £1.1m will rise from six years to ten years.

Since its launch in 2022, the Growth Guarantee Scheme has supported more than £3.7bn of financing, including £2.5bn provided to businesses outside London and the South East.

The government said the changes are intended to address an annual gap of between £1.6bn and £4.1bn between SME demand for finance and the funding available.

Alongside the guarantee expansion, £500m of capacity within the British Business Bank’s ENABLE Guarantee programme will be allocated to lending for intellectual property-rich SMEs and scale-ups.

These firms can face difficulties accessing traditional secured finance because much of their value sits in technology, intellectual property or other intangible assets rather than property and equipment.

The wider package also includes plans to expand community finance. The government said the Community Finance Taskforce will seek to unlock an additional £1bn of SME lending over five years, while the Community ENABLE Funding programme is intended to grow to at least £500m.

Open Finance development will also initially focus on SME lending, with a consultation planned for 2027. The government said improved access to financial data could support faster credit decisions and widen the range of finance available to smaller businesses.

For commercial banks, specialist lenders and alternative finance providers, the expanded guarantees reduce part of the credit risk associated with financing businesses that may fall outside conventional lending criteria.

The measures cover a broad range of financing needs, including investment, growth and working capital, and could increase competition across the UK SME lending market.