The UK Government has announced new plans to support small businesses and sole traders through a £4 million funding boost aimed at improving access to business debt advice.
Delivered through the Money and Pensions Service, the investment is expected to help thousands of businesses over the next three years by expanding access to specialist support for those facing financial difficulties.
This comes as many SMEs continue to grapple with rising costs, cash flow pressures and limited access to finance, thus increasing demand for professional debt advice and financial guidance.
£4 million funding boost to support struggling SMEs
Small businesses and sole traders struggling with finances are set to receive enhanced support under a £4m Government funding package aimed at expanding business debt advice through the Money and Pensions Service.
The funding is expected to expand access to specialist debt support, allowing an estimated 16,000 more businesses to receive assistance over the next three years and bringing the total number to 75,000.
The change builds on the £3 million annual funding allocated by the Money and Pensions Service in 2024 for Business Debtline – a service that supports business owners where personal and business finance often overlap.
Since then, Business Debtline has successfully supported around 50,000 people, with over 90% of clients seeing their debts reduce or stabilise, while demand for its services has continued to grow.
“When financial pressures mount, knowing where to turn can make all the difference,” says Oliver Morley, CEO of Money and Pensions Service. “This vital funding will help more small business owners and sole traders get trusted advice when they need it, so they can regain control of their finances and plan for the future.”
Access to finance remains a challenge for small businesses
This announcement comes at a time when many small businesses continue to face significant financial pressure, with 82% of SMEs facing cash flow difficulties.
Access to finance has proven to be a challenge as well. While gross bank lending for SMEs hit £68bn last year, this has since declined to its lowest level in 30 years, with loans for businesses outside the financial sector falling to 59%.
Banks have also reported moving away from broader SME lending due to higher risks, and instead are favouring lending to companies within specific sectors. For example, real estate SMEs now receive 51% of all loans.
As a result, businesses have faced continuous challenges in accessing finance. According to data reported by The Intermediary, 81% of SMEs say they missed opportunities last year due to a lack of funding, and that while 82% applied for external finance, many still weren’t able to secure funding quickly enough to support growth.
Against this backdrop, the Government’s expanded debt services will aim to help more businesses navigate financial challenges and access better support before problems escalate.
Additional £2 million to modernise debt advice services
Alongside funding to expand debt advice services, the Government is also investing a further £2 million to modernise the way debt advice is delivered.
As part of its Financial Inclusion Strategy, launched in November, the modernisation fund will allow debt advisers to spend more time helping clients, particularly with complex cases that may need additional support.
Previous funding rounds have supported a wide range of initiatives, including AI pilots, digital referral systems, infrastructure upgrades, and improvements to service accessibility.
For example, community-based debt advice charity Money Advice Plus received £49,000 towards enhancing its technology, including AI-supported transcription and upgraded equipment. As a result, initial wait times have reduced by 46%, and advisers have been able to spend more time supporting people in financial difficulties.
Economic Secretary to the Treasury Rachel Black said: “From the plumber fixing your radiator to your local cafe, small businesses are the backbone of our economy, and we know they sometimes need a helping hand when times get tough.
“We’re building on the success of our expert debt services to help tens of thousands more get back on their feet.”
