The UK government supports SME access to finance through a number of schemes, guarantees, and programmes. Understanding what is available helps you decide whether government-backed finance, commercial lending, or a combination is the right route for your business.
Eligibility criteria, availability, and terms for all schemes change regularly. Confirm current details directly with the relevant programme or an independent financial adviser before applying.
The British Business Bank
The British Business Bank (BBB) is a government-owned development bank that does not lend directly to businesses. Instead, it provides capital and guarantees to commercial lenders, enabling them to lend more to SMEs than they might otherwise do on a purely commercial basis. Many high street banks, challenger banks, and fintech lenders participate in BBB programmes. If your lender is BBB-accredited, part of your facility may carry a government guarantee — but the loan is still from the commercial lender, not the government.
Start Up Loans
Start Up Loans is a government-backed scheme providing personal loans (not business loans) of £500 to £25,000 to early-stage businesses and sole traders. The money is lent to the individual, not the company. Applicants receive free mentoring alongside the loan. The scheme is designed for companies in their first 24 months of trading.
Recovery Loan Scheme
The Recovery Loan Scheme (RLS) provides government guarantees on commercial loans to viable UK businesses. Lenders participating in RLS can offer term loans, revolving credit facilities, and invoice finance with the government backing a proportion of each loan, reducing lender risk. This typically results in higher lending limits or better terms for qualifying businesses. Check the British Business Bank website for current accredited lenders.
UK Export Finance (UKEF)
UK Export Finance is the government's export credit agency. It helps UK exporters access finance and insurance products that the commercial market will not provide — for example, political risk insurance or finance for large export contracts. UKEF supports businesses ranging from SMEs to large corporates exporting goods and services globally.
Research and Development (R&D) tax credits
Not a lending scheme, but relevant to finance planning: eligible companies can claim HMRC R&D tax credits on qualifying innovation spend. The credit reduces your corporation tax bill or, for loss-making companies, results in a cash payment. For fast-growing companies spending heavily on product development, the R&D credit cycle can significantly affect cashflow — and can be bridged by short-term commercial finance while waiting for the HMRC payment.
How government-backed finance compares to commercial lending
- Speed: Government-backed schemes are typically slower than direct commercial lending — there are additional eligibility checks and sometimes a panel review process.
- Cost: Rates may be lower than commercial alternatives, but fees and total cost of credit vary significantly by scheme and lender.
- Eligibility: Schemes often have specific eligibility criteria (sector, turnover, trading age, purpose) that commercial lenders do not apply.
- Availability: Scheme availability depends on government funding rounds and is not guaranteed year-round.
See also: Credicorp business loan vs government-backed loan UK, Business loan vs business grant: which is right?, What is a business loan?.