Thousands more small businesses across the UK are set to gain easier access to loans under what ministers describe as the biggest overhaul of small business finance in years.
Chancellor Rachel Reeves announced a package of reforms aimed at increasing lending to small and medium-sized enterprises (SMEs), with the government saying the measures could support an additional 12,000 businesses each year by 2028-29.
The plans include a major expansion of the British Business Bank's Growth Guarantee Scheme, £500m in backing for innovative companies, stronger support for community lenders and new export finance for smaller firms.
The announcement comes ahead of the Chancellor's Mansion House speech on Tuesday, where economic growth and business investment are expected to be central themes.
The government estimates that UK SMEs face an annual funding gap of between £1.6bn and £4.1bn, limiting investment, productivity and job creation.
At the heart of the reforms is the expansion of the Growth Guarantee Scheme, which provides a 70% government guarantee on commercial loans of up to £2m, reducing lenders' risk and making it easier for smaller firms to secure finance.
Launched in 2022, the scheme has already supported more than £3.7bn in lending, including £2.5bn for businesses outside London and south-east England.
Under the new plans, annual lending supported through the programme will rise from £1.35bn to £3.35bn by 2028-29, generating an additional £2bn in lending each year.
The maximum loan repayment period for loans of up to £1.1m will increase from six years to 10 years, while the turnover threshold for eligible businesses will rise from £45m to £54m.
The British Business Bank estimates the changes will increase the number of businesses benefiting from the scheme from around 8,000 to 20,000 annually.
Announcing the package, Ms Reeves said the reforms would help businesses that had too often struggled to obtain the funding needed to expand.
"We know that small businesses are the backbone of this economy and growth in all our regions," she said, adding that the measures represented "the most significant step in years" to unlock their potential.
Business Secretary Peter Kyle said access to finance should not stand in the way of entrepreneurs developing successful companies, describing the expansion as a major boost for Britain's innovators.
Alongside the lending reforms, the British Business Bank will dedicate £500m of its ENABLE Guarantees programme to businesses whose main assets are intellectual property rather than physical property.
The funding is intended to support high-growth firms in sectors including life sciences, technology and the creative industries, where companies can often struggle to secure traditional bank lending despite strong commercial prospects.
The government also announced further backing for Community Development Finance Institutions (CDFIs), which provide finance to businesses unable to access mainstream bank loans.
A Community Finance Taskforce established earlier this year has already secured £10m in philanthropic funding from supporters including JPMorganChase, alongside financial support from BNY, to strengthen the sector.
Ministers said the taskforce aims to help unlock an additional £1bn in lending to smaller businesses over the next five years.
The British Business Bank also plans to expand its Community ENABLE Funding programme, with a second phase launching later this year and ambitions to increase the scheme to at least £500m over time.
Exporting businesses are also set to benefit from a new portfolio guarantee scheme, jointly delivered by UK Export Finance and the British Business Bank.
Due to launch next spring, the programme will make it easier for SMEs to secure finance to expand into overseas markets.
The wider package includes plans to improve financial guidance for small businesses through the Business Growth Service, accelerate work on Open Finance for SME lending, remove legal barriers preventing building societies from increasing business lending and introduce further banking reforms aimed at improving access to finance for fast-growing companies.
The Treasury says the combined measures are intended to stimulate investment, encourage innovation and support job creation as part of the government's wider strategy to boost long-term economic growth.
