Debt management firm Darcey Quigley & Co said the expansion of the Growth Guarantee Scheme will not deliver its full benefit while late payments persist, after the government confirmed changes to support an extra £2 billion in SME lending a year by 2028/29.
The changes were announced on 13 July by the chancellor at the time, Rachel Reeves. The Growth Guarantee Scheme, run by the British Business Bank, offers lenders a 70 per cent government guarantee for commercial loans to small businesses of up to £2 million.
Total loans supported by the scheme will rise to £3.35 billion a year, up from £1.35 billion now. The maximum loan term increases from six to 10 years for loans of up to £1.1 million, and the profit ceiling for eligible businesses rises from £45 million to £54 million.
The British Business Bank estimates that these changes will support an extra 12,000 businesses a year by 2028/29, up from 8,000, bringing the total to 20,000. HM Treasury puts the gap between SMEs’ funding needs and the amount available at between £1.6 billion and £4.1 billion a year.
Lynne Darcey Quigley, chief executive and founder of Darcey Quigley & Co, said improved access to finance is welcome, but many businesses will not see the full benefit if late payments continue to hurt their cash flow.
“The additional funding is a good step that will help many businesses to invest with greater confidence,” he said. “But finance should be increasing, not compensating for cash flow pressures caused by late payments. Businesses should not be in debt because they expect customers to pay what they owe.”
He added: “Businesses that are healthy are not the ones with the biggest debts, they are the ones with predictable and reliable money. Getting money can open up opportunities, but cash flow is what makes businesses work day by day.”
Darcey Quigley & Co said many small businesses continue to face financial pressure because invoices remain unpaid long after agreed payment terms. The company said the result is that otherwise healthy businesses turn to external finance to close cash flow gaps, rather than using it to fund hiring, investment and growth.
“Businesses should no longer borrow money because they expect to be paid for the work they have done,” said Darcey Quigley. “The cheapest source of funding available to any organization is cash it has already earned. Improving payment processes and shortening debtor days can often do more to strengthen financial stability than taking on new debt.”
The company said its intervention comes as UK businesses continue to struggle with rising operating costs, economic uncertainty and weak customer demand. The Federation of Small Businesses reported this month that one in six companies expects to grow in the next 12 months, the lowest rate since the Small Business Index began in 2014.
Separate legislation before parliament would introduce mandatory 60-day repayment terms for companies with revenues of more than £54 million, backed by statutory interest at 8 per cent above the Bank of England’s base rate and new enforcement powers for the Small Business Commissioner.
The British Business Bank has backed a record £9.4 billion in finance for small businesses by 2025/26, including £1.3 billion through the Growth Guarantee programme.
“Strong cash flow underpins all major business decisions,” says Darcey Quigley. “Whether it’s hiring new staff, investing in technology or expanding into new markets, those decisions become much easier when businesses have confidence that payments will arrive on time.
“Government investment will no doubt help many SMEs open up new opportunities. But long-term business sustainability will not be built by borrowing alone. It will be built by creating a business environment where companies are paid well, paid quickly and can confidently invest their hard-earned money.”
