How the Budget Impacts Small Business Loans and Financing

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As budgets go, the Chancellor was actually pretty kind to business owners, revealing tax reductions, pension changes and reduced business rates as well as increased access to business funding. Not bad, so long as they weren’t in the fizzy drinks industry.

In the Budget 2016, George Osbourne promised a range of financial commitments to enable small businesses to access the finance they desperately need for growth. Paramount to this budget was the outlining of its investment through the British Business Bank (BBB).

Help to Grow programme
From April 2016 the BBB which is a state-owned development bank will support lending to fast-growing small firms, with the promise of at least £200m of spending.

In all the BBB will work with local and regional authorities to invest £1bn to help support fast-growth ventures needing investment of between £500,000 and £2m.

Part of this funding includes the establishment of a Midlands Engine Investment Fund which will see £250m invested in local businesses.

Enterprise Finance Guarantee programme
For businesses that doesn’t have a great track record but can demonstrate a considerable amount of collateral, the Enterprise Finance Guarantee programme has been extended and will enable sustained growth for businesses with a promise of investment of over £250m per year.

Small Business Finance
For smaller businesses without a track record yet with particularly ambitious growth plans, achieving appropriate funding isn’t an easy task. The BBB has been tasked with offering finance to those smaller companies so that they can benefit by getting the finance it needs.

According to Keith Morgan, CEO of the BBB, the budget proposes that the BBB “offer both microfinance, loan finance and equity finance to smaller companies, and is a really important opportunity to provide additional support outside of what has been a focus in some areas of finance.”

Business Finance Regulations
The Chancellor also saw fit to ensure that several finance platforms (including Funding Options, Funding Xchange and Bizfitech) will now be regulated by the state. This shows that the government recognises how important these sources of funding are too small businesses, especially in reaction to how the traditional banks haven’t managed to meet the needs of small business owners.

These new regulations should ensure that all finance providers, the high street banks and credit reference agencies, as well as those funding solution providers listed above, will fall within the same SME credit data regulations and have access to the same credit information.

By sharing this information the Chancellor is seeking to encourage increased competition from all financial providers in offering SMEs competitive financing options.

On top of these new government initiatives, designed to encourage a wider level of funding, business owners will have enjoyed some other budget announcements that can help with their investment and tax obligations:

  • Reduction in Corporation Tax
    Corporation Tax is currently 20% but from April 2017 it will reduce to 19% and then 17% from April 2020.


  • Capital Gains Tax reduced
    From April 2016 the current rate of 28% (for higher-rate taxpayers) will come down to 20%. Basic rate taxpayers will pay 10%, however, any gains made on residential property sales (not your primary residence) will remain at the old rates.


  • Personal Allowance increase
    The personal allowance will increase to £11,500 from April 2017 and there is also an increase in the Higher Rate Threshold from £42,385 to £45,000.


  • Business Rates
    The good news for small businesses is that the relief limit will increase to a maximum of £15,000. In doing so, it has exempted 600,000 firms from paying business rates. Even the higher rate limit is increasing from £18,000 to £51,000.


  • Commercial Stamp Duty
    On purchases up to £15,000, the rate will be 0%. From £15,0001-£100,000 it will be 2% and there will be a cap 5% rate for any purchases over £250,000. This new stamp duty is already effective.

If you’re looking for small business loans or finance, or want more information on how to Budget will affect you and your business, get in touch with us today at 03330 069141 or request a callback via the funding guru contact form.