Financing for SMEs: what’s next for nations, regions and communities?
What combination of public financial management, capital market reform, data and market infrastructure investment would most efficiently expand lending to underserved SMEs? This briefing maps the Growth Guarantee Scheme's two categories of non-bank lenders (Regional Investment Funds and Community Development Financial Institutions), the £2bn expansion of the Nations and Regions Investment Funds, the funding model behind community lending to SMEs, and the market infrastructure (open finance, credit data sharing) that will shape whether government can meet its £1bn ambition for community lending.
- The two categories of non-bank lender inside the Growth Guarantee Scheme. Regional Investment Funds and Community Development Financial Institutions (CDFIs) account for £308m of guaranteed loans, £1 in every £12 of GGS facilities, and are growing far faster than the banking sector.
- Who really manages the Regional Investment Funds. A fund-by-fund breakdown of the Northern Powerhouse, Midlands Engine, Greater London, Finance Yorkshire, Finance East and North East funds, tracing risk capital back to the Development Bank of Wales, CDFIs and private fund managers.
- The £2bn second phase of the Nations and Regions Investment Funds. Fund sizes, fair value movements and the four newly-procured fund managers for the South East and East of England funds.
- How CDFIs actually fund themselves. Dormant assets, Better Society Capital, the Community Investment Enterprise Fund, the Community ENABLE Facility, commercial bank lending and Community Investment Tax Relief, and why CDFIs hold a cash buffer of roughly 60p for every £1 lent.
- What it would take to free up £1bn for community lending. A discussion of seven possible funding mechanisms, assessed for scale, deliverability and reliance on private versus taxpayer capital.
- The data and market infrastructure question. The FCA's Open Finance roadmap, the Commercial Credit Data Sharing regime and Bank Referral Scheme reform, and the digital divide this could open between banks and alternative lenders.
This analysis is produced by SDWH Limited for information purposes only. It does not constitute financial, investment or regulatory advice and should not be relied upon as such. SDWH Limited is not authorised or regulated by the Financial Conduct Authority. Readers should obtain independent professional advice before taking any decision based on this material.
Innovation in government loan guarantees
A detailed side-by-side comparison of government loan guarantee schemes in the UK and US. Provides extensive analysis of pricing, risk and trading volumes in secondary markets and securitisations. Looks at how the UK government may be able to close the annual ~£1.1bn gap in the GDP-intensity of government guaranteed lending to SMEs relative to the US. Considers how a £12.5bn pool of institutional capital looking for productive UK assets interacts with the fragmented government guarantees programme of £6bn and a £347bn UK securitisation market in which SME lending barely registers. Indicates that there is an opportunity for innovation to establish a major UK institutional asset class that will attract finance needed to deliver growth agendas including the IT hardware plan and small business strategy. Provides a roadmap for feasibility and stakeholder engagement.
- The UK's guarantee intensity gap. The UK runs government-guaranteed business lending at 0.063% of GDP; the US runs at 0.128%. The government’s plan for small business announced increases in the use of guarantees which, if fully utilised, would narrow this gap.
- The lenders, arrangers, and institutional investors already active in this space. 85 distinct lending institutions have been identified across the three UK schemes; the briefing maps their concentration and cross-scheme participation.
- The interest rates paid by borrowers and the spread absorbed by intermediation. The briefing analyses the SBA's published interest rate caps and the implied margin between borrower cost and investor yield, illustrating how secondary market liquidity narrows that spread over time.
- The default and recovery history that underpins investor confidence. Using twelve annual cohorts of a leading SME lender between 2014 and 2025, the briefing sets out cumulative default rates and recovery rates.
- The cost of capital when business loans reach the capital markets. Based on Funding Circle's tenth securitisation (SBOLT 2026-1, priced May 2026), the briefing sets out the credit ratings, tranche structure, and spreads achieved: senior notes rated A by Fitch at approximately 5.2% all-in, illustrating the yield compression a packaging structure achieves relative to direct lending rates.
- The scale and mechanics of a working secondary market. The US Small Business Administration's 7(a) programme has operated a secondary market for government loan guarantees for 35 years with $10–12bn in annual trading volume, premiums consistently at 110–114 cents on the dollar, and transaction counts doubling to 26,000 per year over 2021–25.
- What the UK could learn from the US. How the US has combined rate caps for borrowers, reduced personal guarantee dependency, higher guarantee fee income, and higher intensity of guarantees to GDP, through a combination of standardisation and transparency.
- Why guaranteed loans are currently excluded from securitisation and what it would take to change that. The GGS guarantee is non-transferable and personal to the accredited lender. The FCA's 2026 consultation paper proposes significant simplification, recognising that current rules are ill-suited to new asset classes. Government and regulator intentions to overhaul SME data are in consultation stage.
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This analysis is produced by SDWH Limited for information purposes only. It does not constitute financial, investment or regulatory advice and should not be relied upon as such. SDWH Limited is not authorised or regulated by the Financial Conduct Authority. Readers should obtain independent professional advice before taking any decision based on this material.
Predictive model for government accountability cycle
The oral hearing at the Public Accounts Committee for Accounting Officers marks the apex of an accountability cycle that starts with the NAO publishing a work in progress (WIP) notice and ends with a Treasury Minute setting out the government's response to the PAC report. This experimental tool predicts the date of the oral hearing for all current NAO WIP notices, using a comprehensive dataset of completed accountability cycles, median time delays, and a self-learning algorithm. It also functions as an indicator of the NAO's planning cycle, showing how far ahead publication dates are determined and what that implies for the overall duration of the cycle from WIP notice to Treasury Minute.
- Predicts PAC oral hearing dates. Uses timing patterns from completed accountability cycles to generate a forecast hearing date for every live NAO WIP notice, updated as new data becomes available.
- Visualises all prevailing WIP notices. An infographic displays the expected publication window for each WIP notice, overlaid with the median time delay and the predictive algorithm's output.
- Reveals NAO's planning horizon. By mapping WIP notice dates against eventual publication dates, the model provides insight into how far into the future the NAO's publication plan is determined at any given moment.
- Tracks the full accountability cycle. From WIP notice to Treasury Minute, the model surfaces duration data across all stages, highlighting where delays accumulate and identifying patterns by department and subject matter.
Analysing trends in performance audit impacts
The NAO published its 2025-26 annual report on 30 June 2026. In the last financial year it reported financial impacts of £2.6bn based on its 5-stage self-directed methodology. This is half the impacts reported in the previous year, which was an all-time high featuring 3 impact unicorns (£1bn+ claims). Across a 6-year period, the NAO has identified impacts of £11.8bn, with three major themes (tax & compliance, infrastructure & capital and commercial & procurement) each providing around £3bn of cumulative impact. With a run-rate of ~60 annual VFM reports a year (360 over 6 years), the 79 identified impact claims indicates impacts corresponding to roughly 1 in every 4-5 reports and an overall blended average of ~£150m per claim, within a reported range that starts from £5m and to date has a maximum value of £1.4bn for a single impact claim.
This analysis is relevant to anyone tracking value for money and the parliamentary accountability cycle.