The UK government’s expansion of the Growth Guarantee Scheme has been welcomed as a boost for small business financing, but industry leaders say its full impact will depend on tackling the persistent problem of late payments that continue to strain company cash flow.
The measures, announced on July 13 by then-Chancellor Rachel Reeves, are expected to increase lending to small and medium-sized enterprises (SMEs) by an additional £2 billion annually by the 2028/29 financial year.
Managed by the British Business Bank, the Growth Guarantee Scheme provides lenders with a 70 percent government guarantee on commercial loans of up to £2 million for eligible smaller businesses.
Under the expanded program, annual lending supported by the scheme will increase from £1.35 billion to £3.35 billion. The maximum repayment period for loans of up to £1.1 million will be extended from six years to 10 years, while the turnover threshold for eligible businesses will rise from £45 million to £54 million.
The British Business Bank estimates the changes will increase the number of businesses supported each year from 8,000 to around 20,000 by 2028/29. HM Treasury has estimated that the annual gap between SME demand for finance and available lending ranges from £1.6 billion to £4.1 billion.
Despite welcoming the additional funding, credit management firm Darcey Quigley & Co said many businesses will continue to face financial pressure unless overdue invoice payments are addressed.
Chief Executive Lynne Darcey Quigley said improved access to finance should help businesses invest and expand, but borrowing should not become a substitute for reliable cash flow.
She said companies should not be forced to seek loans simply because customers fail to pay invoices on time, arguing that businesses with stable and predictable cash flow are generally in a stronger financial position than those relying heavily on credit facilities.
According to the firm, many SMEs continue to experience cash flow problems because invoices remain unpaid well beyond agreed payment terms. As a result, businesses often turn to external borrowing to cover day-to-day operating expenses instead of using finance for hiring staff, investing in technology or pursuing growth opportunities.
Darcey Quigley said the most affordable source of funding for any business is the revenue it has already earned. She added that improving payment practices and reducing debtor days could strengthen financial resilience more effectively than increasing borrowing.
The comments come as many smaller businesses continue to face higher operating costs, weaker consumer demand and ongoing economic uncertainty.
Recent figures from the Federation of Small Businesses showed that only one in six small firms expects to grow during the next 12 months, the lowest level recorded since the organization’s Small Business Index was introduced in 2014.
Alongside the expanded lending program, lawmakers are considering separate legislation that would require companies with annual revenues above £54 million to pay suppliers within 60 days. The proposed rules would be backed by statutory interest set at eight percentage points above the Bank of England base rate and strengthened enforcement powers for the Small Business Commissioner.
The British Business Bank supported a record £9.4 billion in financing for smaller firms during the 2025/26 financial year, including £1.3 billion provided through the Growth Guarantee Scheme.
Business leaders say the additional lending will create new opportunities for SMEs, but stress that long-term resilience will also depend on prompt payment practices that allow companies to reinvest the money they have already earned.
