The government’s Growth Guarantee Scheme, which backs lenders so they can say yes to small businesses they might otherwise turn down, is being expanded. This article sets out what was announced in July 2026, what stays the same, and where London firms fit in.
What was announced in July 2026?
In July 2026 the Chancellor, Rachel Reeves, set out a package of measures on small business finance, which HM Treasury described as the most significant step in years. The Growth Guarantee Scheme (GGS), run by the British Business Bank, sits at the centre of it.
According to the government announcement, the package changes the scheme in two main ways:
- The maximum loan term rises from six years to ten for loans of up to £1.1 million.
- The ceiling on the size of eligible businesses rises from £45 million in annual turnover to £54 million.
Unchanged are the 70% government guarantee and the £2 million maximum facility. The government says the gap between small business demand for finance and the amount available is estimated at between £1.6 billion and £4.1 billion a year, and presents the reforms as a way of narrowing it.
How does the Growth Guarantee Scheme actually work?
The scheme does not lend money itself. Accredited lenders make the loans, and the government guarantees 70% of the loan balance for those lenders. The aim is to help viable businesses that would otherwise struggle to borrow, or could only do so at higher cost.
According to the GOV.UK scheme page, finance of up to £2 million per business group is available. The products covered include:
- term loans
- overdrafts
- asset finance
- invoice finance
- asset-based lending
Applicants must be UK-based, derive more than half their income from trading activity, and be able to show viability. Businesses in difficulty or in relevant insolvency proceedings are not eligible. The scheme page, as consulted for this article, still showed the earlier £45 million turnover limit, so the new £54 million ceiling is best read as an announced change that lenders will implement in due course.
Why longer terms matter for cash flow
A loan spread over ten years rather than six has lower annual repayments for the same amount borrowed, all else being equal. For a business buying equipment, fitting out premises or financing a larger contract, that can make the difference between a repayment schedule that fits the cash the business generates and one that does not.
Illustrative arithmetic, ignoring interest and fees: a £600,000 loan repaid evenly over six years means £100,000 of capital a year. Over ten years it is £60,000 a year, a reduction of £40,000 annually. Real repayments would also include interest, and the longer term means interest is paid for longer, so the total cost of borrowing is typically higher even as the annual burden falls.
The change only applies to loans up to £1.1 million, so larger facilities within the £2 million limit are not covered by the longer maximum term. Any term offered will remain a matter for the lender’s assessment of each business.
For owners who have already felt the squeeze on working capital, the broader discussion in what business owners should understand about cash flow is a useful companion: repayment timing, not just the headline rate, determines whether a loan helps or hurts.
What does the 70% guarantee mean in practice?
The guarantee protects the lender, not the borrower. A worked example shows the mechanics.
| Loan balance outstanding | Government guarantee (70%) | Lender’s unguaranteed share (30%) |
|---|---|---|
| £100,000 | £70,000 | £30,000 |
| £500,000 | £350,000 | £150,000 |
| £1,000,000 | £700,000 | £300,000 |
Because the lender still carries 30% of the risk, it still has to be satisfied that the business can repay. The guarantee lowers the credit risk of saying yes. It does not turn a weak application into a strong one.
What about personal guarantees and the family home?
Personal guarantees are a common worry for founders. The government’s policy annex for the small business plan states that primary residences are already excluded from personal guarantees that support GGS loans. It also describes a mandatory code of conduct for GGS accredited lenders, intended to make communications about personal guarantees clear and their use fair and transparent.
That does not mean no personal guarantee can ever be requested, and terms vary by lender. The practical point for borrowers is that the rules on residences and the lender code of conduct are part of the scheme’s published framework.
How big is the scheme, and where has the money gone?
The numbers give a sense of scale. According to the government announcement, since its launch in 2022 the scheme has delivered over £3.7 billion of financing to UK small and medium-sized businesses, of which £2.5 billion reached businesses outside London and the South East.
Illustrative arithmetic: £2.5 billion is roughly two-thirds of £3.7 billion, which leaves something over a third, in the region of £1.2 billion, for firms in London and the South East combined. The figures are described as “over”, so the split is approximate, and the announcement does not break out London separately.
The expansion targets, by 2028/29, are:
| Measure | Today | Target |
|---|---|---|
| SME lending supported each year | £1.35 billion | £3.35 billion |
| Businesses supported each year | 8,000 | 20,000 |
The arithmetic holds together: £1.35 billion plus an additional £2 billion gives £3.35 billion, and 8,000 plus an additional 12,000 gives 20,000, the 150% increase the British Business Bank estimates. These are projections rather than guarantees, and they run to 2028/29, so the effect on any one London borrower will be gradual.
Is a bigger scheme good news for London firms?
The honest answer is that it depends on the business. London has a deep supply of finance compared with much of the country, so the scheme’s regional record, with most of the money going outside London and the South East, suggests it has often been used where lenders are thinner on the ground. That does not make it irrelevant in the capital.
Three groups stand to gain most from the changes:
- Capital-intensive firms, such as restaurants, workshops and food producers, for which a longer term eases the repayment burden on fit-outs and equipment.
- Established mid-sized businesses, which sit near the old £45 million turnover limit and may now come into scope up to £54 million.
- Firms short of collateral, since a government guarantee can help a lender look past thin security.
London operators already juggling higher property costs will recognise the wider pressures described in the financial pressures London’s small businesses are navigating, and the revaluation effects covered in what the 2026 business rates changes mean for London shops and pubs. Cheaper-to-service debt is one response, though it is no substitute for sound margins.
What else is in the package?
The scheme is one strand of a wider set of measures. According to the government announcement:
- ENABLE Guarantee: the British Business Bank has allocated £500 million of capacity within this programme to unlock lending to small and scaling firms rich in innovative intellectual property, such as creative and life sciences businesses, which can struggle to offer physical collateral.
- Community lenders: seven community development finance institutions have been accredited under Community ENABLE Funding, with £120 million of government funds already committed, and a second phase planned later in 2026.
- Export finance: a new portfolio guarantee scheme, delivered jointly by UK Export Finance and the British Business Bank, is due to launch in spring 2027.
- Open Finance: a government consultation is planned for 2027, with an initial focus on small business lending.
Several major banks, including NatWest, Lloyds, Barclays, Santander, HSBC and Allica Bank, were reported in the announcement as having committed to increased small business lending.
What should founders weigh before borrowing?
A guarantee makes credit more available. It does not make it free. Founders considering any facility, whether or not it is backed by the scheme, typically weigh the same questions: what the repayments are against forecast cash, how interest and fees compound over the term, what security or personal commitments are requested, and what happens in a slow quarter.
Because the scheme works through accredited lenders, terms, pricing and appetite will differ between them. The British Business Bank maintains a list of accredited providers, and the reforms will reach borrowers only as lenders adopt them. Anyone planning a new facility around the extended terms should check what a specific lender is offering at the time, rather than assuming the announced limits are already available.
For founders earlier in the journey, the hurdles described in the practical challenges facing new businesses in London are a reminder that finance is only one part of the picture.
Longer terms, wider reach, same discipline
The July 2026 reforms make the Growth Guarantee Scheme larger, longer and open to somewhat bigger businesses, with the stated aim of supporting 20,000 firms a year by 2028/29. For London operators, the most concrete changes are the ten-year term on loans up to £1.1 million and the £54 million turnover ceiling. The fundamentals are unchanged: a lender still has to be convinced, and repayments still have to be met from real cash.
This article is general information, not tax, legal or financial advice. Scheme rules, limits and lender terms can change, so check current details with the British Business Bank and the lender concerned.
Sources: GOV.UK; HM Treasury
