What’s next for nations, regions and communities?

This briefing is timely because the government, via the British Business Bank, has renewed its commitment to £2bn of funding commitments for Regional Investment Funds (equity, debt and loan guarantees), an expansion of the Growth Guarantee Scheme by £6.5bn indicating the potential for a significant increase in financial guarantees, expansion of the Community ENABLE Fund, and the establishment of a Community Finance Taskforce focused on increasing community lending to SMEs by £1bn over five years.

Figure 1 sets out the current emphasis across a range of policy options, with examples. It signals that these are orientated towards the supply of finance. In relation to the demand for credit, themes including business formation and investment, access to credit (approval rates) and prices (borrowing rates) do not feature prominently in the most recent announcements, but pricing is discussed briefly in Part 3.

The contents of this briefing

• Part 1: Growth Guarantee Scheme — two categories of non-bank lenders in scope
• Part 2: Nations and Regions Funds
• Part 3: Community lending for SMEs
• Part 4: Market infrastructure

Who should read this briefing?

• Providers of finance to community lenders
• Community lenders raising private finance to fund new lending activity
• Fund managers responsible for SME loan portfolios
• Local authorities supporting community and regional lending to deliver growth policies
• Data and digital experts with SME lending solutions
• Government officials and policy experts interested in government loan guarantees

Part 1: Growth Guarantee Scheme — two categories of non-bank lenders

The Growth Guarantee Scheme (GGS) provides a 70% taxpayer-funded guarantee to loans of £25,000 to a maximum of £2m per business group and loan terms of up to five years, for companies with turnover up to £45m.¹ Government loan guarantees are a popular policy tool to increase the supply of capital because loans are issued by the private or voluntary sector; the government earns an income (an ‘insurance premium’) that is expected to cover cash settlements when guarantees are called after a borrower fails to repay and after the lender has completed its loan recovery procedures.

Guaranteed facilities stood at £3.6bn in March 2026. On 12 July 2026 the BBB announced² that government had approved a £6.5bn uplift to the GGS, an expansion of the Community ENABLE Scheme, and signalled that discussions will begin later this year on crowding in private capital for the programme, with an ambition to grow support of up to £1bn of additional community smaller-business lending. This announcement also indicated that the GGS will be extended to provide loan facilities longer than five years (including 6–10 year facilities) and that the turnover threshold will increase from £45m to £54m.

The GGS is the British Business Bank’s (BBB) flagship government loan guarantee scheme, delivered via a diverse population of 68 accredited providers, which has expanded to £3.6bn of business loans at 31 March 2026 (21,194 loans guaranteed with an average loan value of £171,893). Figure 2 summarises the Growth Guarantee Scheme facilities as of 31 March 2026 by lender type, including the increase in facilities over the 15 months from December 2024.

The scope of this briefing focuses on two categories of accredited provider that represent £308m of guaranteed loans — in other words, £1 in every £12 of Growth Guarantee Scheme facilities. These 34 ‘non-bank lenders’ can be placed into two broad categories: Regional Investment Funds (or Nations and Regions Funds), administered by fund managers; and Community Development Financial Institutions (CDFIs, or community lenders), which are subsequently analysed by economic model (for example, private finance, not-for-profit and public sector body). Some of the regional fund managers are themselves CDFIs.

CDFI facilities have almost doubled in value over the period (+92% to £181.7m), whilst the Regional Investment Funds have grown slowly (+4% to £126.3m) because most of these funds were fully invested at that date. This briefing investigates a subset of half of these providers.

Settlement rates by lender type

The BBB website contains quarterly performance data for each accredited provider, including the number of facilities, value of facilities (gross lending subject to a GGS guarantee) and settlement amounts. Settlements record the gross amount of taxpayer funding issued to cover the 70% guarantee, and are stated prior to any final recovery from the borrower.

Figure 3 provides an aggregated summary, using quarterly data published for the period December 2024 to March 2026, representing the entire time range available from the BBB website at the date of this briefing. The performance of individual lenders varies. The aggregated settlements ratio by value of facility has increased over time and varies by lender type, and the settlement ratios for community and regional lenders (as well as fintech) are several times higher than those of the banking sector.

Caveat: the table contains a limited time series and does not take account of relevant factors such as the rate of lending, loan book maturity and economic conditions. It is therefore not indicative of any trend.

Some lenders publish performance data for their own loan books. For example, Funding Circle is a leading provider of SME loans in the UK, both via GGS-guaranteed loans and loans that carry no government guarantee. Over the past decade, Funding Circle has raised ~£2.5bn from institutional investors via its SBOLT securitisation programme, which it has used to finance SME lending that is not subject to a government guarantee. Figure 4 provides a stylised illustration comparing guaranteed and non-guaranteed lending, to clarify the meaning of the ‘settlement’ data published by the BBB.

Part 2: Nations and Regions Funds

This section summarises the loan guarantees issued under the first-phase Regional Investment Funds, and the planned expansion of these funds across equity and debt capital. BBB’s data shows that the £126.3m of lending backed by GGS guarantees spans 16 separate regional funds. The 16 legal entities that operate the schemes are Limited Partnerships and Registered Companies that use acronyms referring to the fund names.

First phase: Regional Investment Funds

Based on an analysis of BBB data and Companies House records, this is summarised in Figure 5. The Northern Powerhouse (NPIF) is the largest component (£59.9m, 47% of total), followed by Midlands Engine (MEIF) (£30.8m, 24%), Greater London Investment Fund (GLIF) (£21.3m, 17%), Finance Yorkshire (£5.7m, 5%), Finance East (£4.6m, 4%) and North East Growth Fund (ERDF) (£4.0m, 3%). These programmes are almost completely closed and fully invested, and are now in a collection phase.

Figure 5 indicates that the fund managers can be mapped to three distinct categories, including the Development Bank of Wales (i.e. taxpayer funded). The analysis shows the distribution of ‘risk capital’ relating to the non-guaranteed parts of the loan book. The largest source of capital is via Community Development Financial Institutions (£62.0m, 49%), followed by taxpayer funding via wholly-owned subsidiaries of the Development Bank of Wales (£36.7m, 29%), and private finance including employee-owned fund managers (£27.7m, 22%). In summary, just under a third of the risk capital for the first phase of Regional Investment Funds can be traced directly to taxpayer sources via the Development Bank of Wales supporting the Northern Powerhouse funds. This estimate of taxpayer-funded risk capital is a low estimate, given that several CDFIs are associated with several local authorities.

Second phase: Nations and Regions Investment Funds

According to the BBB’s five-year strategic plan (2026–2031), the GGS will unlock £5bn of finance through over 50 accredited partners.³ The Nations and Regions Investment Funds are to be expanded to £2bn, offering a mixture of debt and equity including SME lending and smaller loans.

This includes the second phase of the Northern Powerhouse and Midlands Engine; Regional Investment Funds for Northern Ireland, Scotland and Wales; and new funds for the East and South East of England. The regional funds are intended to support a range of financing solutions (equity and debt), so the GGS component for each fund is not disclosed. Figure 6 summarises the headline fund sizes underpinning this plan.

Fair value of nations and regions funds at 31 March 2025

Nations and Regions Investments Limited (NRIL) is a BBB subsidiary through which the £1,610m Nations and Regions Investment Funds (NRIF) programme is delivered. NRIL’s annual report and financial statements for the year ended 31 March 2025 show that NRIF’s credit and investment risk is spread across 28 Limited Partnerships, and that of the £1,610m programme envelope, £1,126m had been committed to sub-funds by the balance sheet date.

Figure 7 shows that at 31 March 2025, £215.2m was carried as the fair value of live investments (Debt £108.1m: Equity £107.1m), against £884.2m of undrawn commitments (Debt £373.6m: Equity £510.6m). As at 31 March 2025, NRIF had deployed approximately £197.8m to 612 SMEs, against more than 9,900 enquiries and 1,400 applications. NRIL’s accounts also disclose £7.2m of management fees charged by British Business Bank plc for the year (2024: nil), covering allocated staff costs and shared services. This administrative cost is separate from individual fund-manager fees disclosed in the underlying Limited Partnerships’ own accounts.

Appointment of fund managers

The announcements also indicate that four new fund managers have been appointed by BBB to manage funding sources (including debt and equity) within the second phase of the Nations and Regions Investment Fund programme, which has an estimated contract value of £52m ex VAT, as summarised in Figure 8.

Part 3: Community lending

This section considers guarantee lending issued via Community Development Financial Institutions (CDFIs), and their access to the capital they require to originate loans. According to BBB data, the stock of guaranteed lending issued by the 18 lenders categorised as CDFIs stood at £181.7m as of March 2026, an increase of 92% since December 2024, comprising 1,761 guaranteed loans with an average value of £103,186 per loan.

What is a CDFI? A Community Development Financial Institution, CDFI, is a non-profit lender that provides debt finance and support to businesses through a relationship-based approach to lending.

Source: BBB.

Principal sources of capital for CDFIs

The vast majority of CDFIs cannot raise equity capital by issuing shares, because they are registered as Companies Limited by Guarantee (not by shares), whilst a small number are companies limited by shares that are in turn 100% owned by companies limited by guarantee. Some are registered under other models including Community Interest Company and Industrial and Provident Society; several are registered charities.

The choice of legal identity and economic model means that, practically speaking, CDFIs cannot raise equity by issuing shares, and are therefore dependent on other sources of funds and hold significant ‘cash buffers’. This section provides further detail on how CDFIs fund their operations. Community Investment Tax Relief is available for individuals and corporate bodies. The main sources of finance for CDFIs are therefore: funds that flow from dormant bank accounts; direct funding issued via BBB’s Community ENABLE Fund (CEF); Better Society Capital financing, including the Community Investment Enterprise Fund (CIEF), a loan fund that crowds in private finance; and loans from commercial banks, local authorities, other sector participants and philanthropy.

Government interest in community lending

The community lending sector became a priority for government in 2026. In January 2026 a new All-Party Parliamentary Group for Community Development Financial Institutions was launched. In February 2026 the Minister for Small Business and Economic Transformation announced the launch of a UK Community Finance Partnership Taskforce. BBB’s strategic plan identified increased capacity for ‘non-commercial guarantees’ of £3bn.

In June 2026 the Maple Review was published.⁵ Subtitled “Exclusion and Enterprise: Entrepreneurship, Poverty and Breaking Down Barriers”, it was an independent, government-backed review into the barriers to entrepreneurship caused by economic hardship. In July 2026 BBB signalled the government’s ambition to crowd in private capital to support £1bn of additional community lending to small businesses.

Responsible Finance impact report: community lending rates and borrowing costs

The CDFI sector is represented by Responsible Finance, a trade body with around 40 members. Responsible Finance’s 2026 impact statement indicates that the flow of new lending to SMEs by its members grew by over a third in 2025 to £110m. This excludes lending under the start-up loan scheme and lending to individuals (not in scope for this briefing).

Figure 10 shows that 1,132 SMEs took out loans with an average value of £97,694 at a weighted average interest rate of 14.95%, with a term of less than five years. These datasets indicate similar average loan values, but the data is not directly comparable because Responsible Finance measures the annual flow of lending, whereas BBB reports the stock of guaranteed loans at a single point in time.

According to Responsible Finance’s 2026 impact report appendix,⁸ the average interest rate on SME lending was 14.95% in 2025. The Bank of England base rate reduced from 4.75% to 3.75% between January and December 2025, and stood at 3.75% in July 2026. This suggests, in broad terms, that CDFI lending rates were ~10–11 percentage points over Bank of England base rate last year.

Community ENABLE Facility (CEF)⁹

The Community ENABLE Facility (CEF) provides direct taxpayer support to CDFIs. In February 2026,¹⁰ Responsible Finance reported that government was increasing the Community ENABLE Fund to provide an additional £150m of taxpayer funding to CDFIs. In addition, it was reported that JPMorgan is supporting a £4m capacity-building initiative to help strengthen CDFIs’ operations.

The CEF programme provides funding in exchange for CDFIs’ SME loan receivables. CDFIs apply by responding to BBB’s own Request for Proposals,¹¹ which sets minimum standards (covering track record, systems and risk management, and portfolio diversification), alongside a growth target: applicants are asked for evidence of their ability to ramp up to their proposed maximum portfolio size within 24 months of closing, with preference given to proposals of at least £3.5m across at least 100 loans.

British Business Financial Services Limited (BBFSL) acts as a secondary buyer, warehousing the pooled loans within the programme rather than the CDFI holding them alone. In its current, initial phase this funding comes entirely from government; a second phase envisages introducing private sector investors once the programme has built sufficient scale and portfolio history.

By February 2026, six CDFIs had joined the CEF: ART Business Loans, BCRS Business Loans, Coventry and Warwickshire Reinvestment Trust, Finance for Enterprise, First Enterprise, and Let’s Do Business. On 12 July 2026, BBB announced SWIG Finance as the seventh accredited lender for its Community ENABLE Funding programme, with an allocation of £17.5m dedicated to supporting smaller businesses in the South West of England. This takes the cumulative CEF facility to £120m at 12 July 2026, as shown in Figure 11.

Dormant assets and the Community Investment Enterprise Fund (CIEF)

Dormant assets (e.g. unclaimed bank accounts) represent an important source of funding for CDFIs, and there are numerous stages in the flow of funds where opportunities exist to ‘crowd in’ private finance, as described in Figure 12.

Reclaim Fund Limited (RFL) operates under the Dormant Assets Act 2022.¹² It is an arm’s-length body sponsored by HM Treasury with responsibility for holding residual risks relating to dormant assets and distributing its surplus after costs and provisions against claims; over 50 participating financial institutions transfer funds into RFL once reunification efforts have failed, after which RFL takes full liability for future claims. In 2024/25 RFL received £173.0m from dormant bank accounts and dispersed £143.3m to TNLCF. RFL held assets of £906.2m and reserves against future claims of £186.7m. RFL has distributed cumulative surpluses of £1.6bn to the National Lottery Community Fund.

The Oversight Trust is responsible for distributing TNLCF funds in England, and does so via Better Society Capital (in which it owns 68.5% of the equity), Fair4AllFinance (in which it is the sole member), Youth Futures Foundation and Access. The Oversight Trust has provided £425m¹³ of funding to Better Society Capital, by purchasing shares. Since inception, Better Society Capital has made 58 social lending investment commitments and committed £384m of capital, representing 39% of its portfolio.¹⁴

The Community Investment Enterprise Facility (CIEF) is a £72m loan fund established by Better Society Capital.¹⁵ The fund is managed by Social Investment Scotland. BSC invested £10m and Lloyds Banking Group co-invested. In 2025 Triodos Bank co-funded £10m, made available to SWIG Finance to support more micro and small businesses in the South and West Country.

Loans from commercial banks

Based on an analysis of Companies House records, CDFIs raise debt from several commercial banks. Registered charges (formal registration of the security a lender holds over a loan) and annual report commentary suggest that during the 2024/25 financial year, active lenders included Unity Trust Bank Plc, Lloyds Banking Group, Triodos Bank and Co-operative Bank. There are also several examples of CDFIs providing mutual support within the sector. According to Responsible Finance,¹⁶ several financial institutions are long-term backers of CDFIs, including JPMorgan Chase, Lloyds Banking Group, NatWest Group, Unity Trust Bank, Charity Bank, Triodos Bank and Shawbrook Bank.

The 2025 financial statements for four of the CDFIs disclosed similar typical commercial terms for the wholesale debt they had raised, indicating pricing of ‘base rate plus 3.5%’. Bank of England data indicates that between 1 April 2024 and 31 March 2025, the Sterling Overnight Interest Rate (SONIA) fell from 5.2% to 4.5%, suggesting that for this subset of CDFIs the cost of wholesale finance in 2024–25 was around ~8–9%, though any financing facility would be case-specific. With the caveat that caution is required before comparing two independent indicators for lending and borrowing rates, comparing the ‘spreads’ over benchmark for loans from commercial banks suggests that wholesale financing spreads at which CDFIs borrow expand by roughly a factor of three when translated into financing costs for SME borrowers.

Community Investment Tax Relief (CITR)

According to HMRC,¹⁷ the Community Investment Tax Relief scheme encourages investment in disadvantaged communities by giving tax relief to investors who back businesses (and other enterprises) in less advantaged areas. The tax relief is available to individuals, banks and companies, and is worth up to 25% of the value of the investment in the community development finance institution. The relief is spread over five years, starting with the year in which the investment is made. The official government list¹⁸ (dated 22 September 2025) identified 29 accredited CDFIs that can take CITR investment. Responsible Finance¹⁹ estimated that £145m in private investment has been raised by CDFIs using CITR.

Cash buffer in lieu of equity

SDWH Limited cross-referenced CDFIs accredited by the BBB to issue GGS statistics with Companies House data, to identify a core set of 15 CDFIs. Using financial statements combining the two years ended 31 March 2025, this population had aggregate balances as follows: total cash of ~£62–72m, total loans issued of ~£114–120m, and total external borrowing of ~£84–97m. These CDFIs had net assets of £99–104m and generated an operating surplus of ~14–16%.

The experimental analysis suggests that CDFIs hold a cash buffer: indicatively, for every £1 of lending, CDFIs hold an additional 60 pence of cash on their balance sheet. If this represents a reliable benchmark for the overall sector cash buffer, it would suggest that ~£1.5–1.6bn of additional capital would be required to release £1bn of lending envisaged by the Community Finance Taskforce.

Discussion options: what combination of measures could free up £1bn of additional capital for community lending?

The government’s stated ambition is to expand CDFI lending by £1bn over the next five years and ‘crowd in’ private finance. What combination of initiatives could achieve that outcome most efficiently and sustainably?

Figure 14 aims to summarise the overall potential for various sources of funds to contribute towards additional lending.

Part 4: Market infrastructure

A digital divide?

The Financial Conduct Authority’s intention to roll out Open Finance for SME lending from 2028, and the government’s intention to extend Commercial Credit Data Sharing to a larger number of financial institutions (while stopping short of designating all financial institutions, including CDFIs), raises strategic questions for community lenders about the costs and benefits of voluntary data sharing and investment in digital services.

The Financial Conduct Authority’s 2026 vision for Open Finance: “We are prioritising exploring how open finance can improve access to lending for SMEs. They play a vital role in supporting the UK’s economic growth, and we recognise the importance of accessible SME finance.”

The FCA’s vision for open finance aims to increase innovation and competition, deliver inclusive consumer and SME outcomes, and enhance economic growth. It has identified a range of potential benefits, including: product innovation to enhance access to finance; a whole-life view of finances to improve financial outcomes and limit mistakes; faster decisions and improved efficiencies that deliver lower prices and savings to businesses; improved capital allocation to raise investment across the broader economy; improved risk allocation and mitigation, allowing more growth-enhancing business decisions such as funding businesses and protection from economic shocks; data-enabled automation, analytics and decision-making to identify and limit fraud and financial crime; and establishing the UK as a world leader, opening opportunities to export technology and attract inward investment.

FCA view of key barriers: “business uncertainty about investing in open finance tools due to concerns over cost, liability, compliance or fraud … lack of a clear incentive structure for firms to actively participate … lack of centralised investment in shared infrastructure that would support interoperability, oversight and long-term adoption.”

Source: Financial Conduct Authority.²⁰

Government consultation on SME finance (October 2025 – May 2026)

Commercial Credit Data Sharing (CCDS) stems from regulations introduced in 2015. CCDS requires major lenders (banks designated by the Treasury) to share credit information on their small and medium-sized business customers with credit reference agencies (CRAs) designated by the Treasury, to improve access to finance. CCDS operates under the Small and Medium Sized Business (Credit Information) Regulations 2015. Following a consultation in 2025, the government plans to proceed with changes to CCDS when parliamentary time allows, enabling government to extend the list of designated banks. However, it stopped short of including all financial institutions in this future legislation, leaving open the question of how and whether CDFIs may participate voluntarily in CCDS.

Between October and December 2025 the government ran a public consultation on two pillars of the UK’s statutory SME finance framework: the Commercial Credit Data Sharing (CCDS) scheme and the Bank Referral Scheme (BRS). The government response to the consultation was published on 1 May 2026.²¹ In it, HM Treasury noted: “The Government is highly supportive of efforts to improve the information available to SMEs to support them navigate credit.”

• Bank Referral Scheme (BRS). Government noted that most respondents advocated a fundamental shift away from the current design of the Bank Referral Scheme, on the basis that respondents felt the Scheme is not currently delivering adequately given that only 5% of referred SMEs go on to obtain alternative finance successfully. According to the British Business Bank,²² the Bank Referral Scheme is a three-step process: a business approaches a bank participating in the scheme for an eligible lending facility; if the bank is unable to provide a lending facility, the business is automatically offered a referral to one of three designated referral platforms, which may be able to help it find alternative sources of finance; if the applicant agrees to be referred, its details are passed to the designated referral platform by the end of the next working day.
• Commercial Credit Data Sharing (CCDS). Government said that enhancing the CCDS framework could further support SME lending by improving the quality and consistency of shared data, helping to create a more consistent and accurate credit footprint for UK SMEs. It said that government intends to proceed with facilitating the sharing of information by finance providers with all designated CRAs, and noted that platform fees were raised as a difficult fit with the not-for-profit or ‘mission-driven’ investment model of CDFIs. It said there was a wide range of views on the likely costs associated with initial designation, which government had previously estimated at around £1.5m for each firm when first introducing the CCDS regime, though some providers suggested the cost would be much lower given the likelihood of a newly designated firm already participating in CCDS voluntarily, whilst others considered the cost of new entrants could be high.

Appendix: further research topics

This appendix outlines potential research topics to further explore SME lending via non-bank accredited providers such as CDFIs and third-party fund managers appointed to administer the nations and regions funds and successor guarantee schemes.

Sector financing agenda (building on Parts 2 and 3)

Lender level

• Comparative benchmarking and health check (e.g. systems, risk modelling, financial standing, governance) and readiness for institutional, CEF and CIEF participation for CDFIs and regional funds
• Better understanding of risk management and the role of the cash buffer that CDFIs retain for risk management purposes
• Development of economic capital models and debt capacity models for CDFIs, including potential interactions between the use of registered charges and overall borrowing limits

Funder level

• Understanding Reclaim Fund Limited’s board decisions on provisioning for future claims and distributions that determine the quantum and timing of financial flows via Better Society Capital
• Influencing Better Society Capital’s continued prioritisation of SME lending within its overall social impact investing mandate
• Expanding CIEF with an appropriate mix of public and private funding
• Incentivising increased supply of private capital to non-bank lenders including CDFIs via commercial loans
• Reviewing progress and the pathway for the CEF to become a mainstream securitisation programme — shaping the long-term direction for GGS beyond the July 2026 revisions, including potential reforms to facilitate an active secondary market in government loan guarantees
• Understanding the relationships across various government guarantee schemes, including the General Export Facility (GEF) administered by UK Export Finance
• Optimising the appointment process for fund managers to the Regional Funds via competitive selection

Sector data agenda (building on Part 4)

• Transparency agenda for guarantee pricing and continuous performance monitoring at portfolio, provider and recipient level
• Bridging the potential digital divide that could emerge between banks and alternative lenders
• Understanding the role of open data in encouraging increased supply of wholesale finance to the CDFI community
• Understanding the relationship between loan pricing, loan performance and data quality
• Understanding the costs and benefits of common data standards for CDFIs and Regional Funds
• Addressing concerns that high platform fees are a barrier to digital transformation