SMEs and scaleups are sest to recieve £500m in new funding from the UK government to boost job creation and business growth.

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 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 £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.

Now, 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.

The maximum term lenght of a loan will increase from six to ten years for loans of up to £1.1 million, and the maximum size of businesses that are eligible for a loan under the scheme will be increased from £45m in annual turnover to £54m.

The British Business Bank 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.

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“Our plan for the economy has put Britain on a stronger footing – restoring stability, getting investment flowing, and delivering reform,” chancellor of the exchequer, Rachel Reeves, said.

“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.”