Late payments will limit £2bn lending expansion, credit firm says

Credit management firm Darcey Quigley & Co has said the expansion of the Growth Guarantee Scheme will not deliver its full benefit while late payment continues, after the government confirmed changes that will support an additional £2 billion of SME lending a year by 2028/29.

The changes were announced on 13 July by the then chancellor, Rachel Reeves. The Growth Guarantee Scheme, run by the British Business Bank, gives lenders a 70 per cent government guarantee on commercial loans to smaller businesses of up to £2 million.

Total lending supported through the scheme will rise to £3.35 billion a year, 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 turnover ceiling for eligible businesses rises from £45 million to £54 million.

The British Business Bank estimates the changes will support an additional 12,000 businesses a year by 2028/29, up from 8,000, taking the total to 20,000. HM Treasury puts the gap between SME demand for finance 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 was welcome, but that many businesses would not realise the full benefit if late payments continued to undermine their cash flow.

“The additional funding is a positive step that will help many businesses invest with greater confidence,” she said. “But finance should enable growth, not compensate for the cash flow pressures created by late payments. Businesses should not have to borrow simply because they are waiting for customers to pay what they owe.”

She added: “The healthiest businesses aren’t necessarily those with the biggest credit facilities, they’re the ones with predictable, reliable cash flow. Access to finance can create opportunities, but cash flow is what keeps businesses operating day to day.”

Darcey Quigley & Co said many smaller companies continue to face financial pressure because invoices remain unpaid long after agreed payment terms. The firm said the consequence is that otherwise healthy businesses turn to external finance to bridge cash flow gaps, rather than using it to fund recruitment, investment and growth.

“Businesses should never have to take on additional borrowing simply because they are waiting to be paid for work they’ve already completed,” Darcey Quigley said. “The cheapest source of funding available to any organisation is the money it has already earned. Improving payment practices and reducing debtor days can often do more to strengthen financial resilience than taking on new debt.”

The firm said its intervention comes as UK businesses continue to face rising operating costs, economic uncertainty and subdued customer demand. The Federation of Small Businesses reported this month that just one in six small firms expects to grow over the next 12 months, the lowest proportion since its Small Business Index began in 2014.

Separate legislation before parliament would introduce mandatory 60-day payment terms for companies with revenues above £54 million, backed by statutory interest at 8 percentage points above the Bank of England base rate and new enforcement powers for the Small Business Commissioner.

The British Business Bank supported a record £9.4 billion of finance for smaller firms in 2025/26, including £1.3 billion through the Growth Guarantee Scheme.

“Strong cash flow underpins every major business decision,” Darcey Quigley said. “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 when they should.

“The Government’s investment will undoubtedly help many SMEs unlock new opportunities. But long-term business resilience won’t be built through borrowing alone. It will be built by creating a business environment where companies are paid fairly, paid promptly and can confidently reinvest the money they’ve already worked hard to earn.”