As part of proposed changes to the way early years funding is distributed, the government says it will make local authorities pass on more cash to providers.
In a bid to stop councils holding back money they will introduce a "minimum threshold" on the proportion of government early years funding that local authorities must pass on to providers.
However councils will be given until 2019/20 before they are required to hand out the same "universal" funding rate to all providers in their area.
"We recognise that for some local authorities, moving to a universal ‘per child, base rate of funding to providers will be a significant change," a consultation document on the proposals published by the Department for Education states.
"We therefore propose to allow local authorities until 2019/20 to implement this while encouraging them to do so sooner if possible, and monitoring their progress."
Councils will also be expected to pass on more of the money they receive from central government to frontline childcare providers - 93 per cent of the funding they receive from government in 2017/18 and 95 per cent from April 2018.
The amount of money councils receive from central government will be based on a proposed new formula, under which councils will get a base rate for each childcare place making up 89.5 per cent of the total. The remainder will be based on the proportion of children in the area with additional needs. There will also be an "area cost adjustment" to reflect cost differences between local areas, such as staff costs.
Neil Leitch, chief executive of the Pre-school Learning Alliance, said that although a number of the proposals are "very encouraging", providers still face a potential wait of three years until universal funding rates come into effect.
"Given that many of the changes announced today are going to be introduced over a prolonged period - with the universal base rate not made compulsory until 2019/20 - it's vital that government takes steps to ensure that providers are adequately supported in the interim period, especially in light of the impending rollout of the 30-hour free entitlement offer."
But he said that moving towards a universal base rate of funding for all provider types is a "significant and undoubtedly positive step" for private, voluntary and independent providers, pointing to the fact that they who have historically received less funding than nursery schools and primary nursery classes.
"We also welcome the proposal to limit the proportion of funding that local authorities can retain to five per cent, especially given that the latest DfE statistics suggest that more than half of local councils currently exceed this amount," he added.
"That said, distribution of funding is only part of the funding story. Clearly, if the central pot of early years funding is insufficient, then no matter how well it's distributed, those on the frontline will lose out.
"Given that the government still has no idea what the hourly cost of delivering childcare is, there is a danger that today's proposals will mean that many providers will receive more funding, but still not enough."
The consultation closes on 22 September.