Jul 28
Gross lending to UK SMEs by participating high-street lenders reached £5.3 billion in the first quarter of 2026. This was 16% higher than a year earlier and the strongest quarterly total since the pandemic lending schemes ended in 2021.
The figures indicate improving access to business finance, but they do not mean every application will be approved. Businesses seeking growth funding should prepare current accounts, realistic forecasts and a clear explanation of how the money will be used. Our guide to how management accounts help SME owners is a useful starting point.
Lending growth accelerated from the 6% annual increases recorded in each of the previous two quarters. Lending to the smallest businesses rose by 51% year on year, while both the number and value of newly approved loans increased sharply.
The wider SME lending market also strengthened during 2025, although repayment levels and economic uncertainty mean businesses should not assume that current conditions will continue indefinitely.
| Measure | Latest reported figure |
|---|---|
| Gross SME lending by participating high-street lenders, Q1 2026 | £5.3 billion, up 16% year on year |
| Lending to the smallest businesses | Up 51% year on year |
| New loan approvals | Value up 36%; number up 42% |
| Gross SME bank lending across the wider market, 2025 | £68 billion, up 9% |
The full figures are available in the latest Business Finance Review.
New lending was slightly below SME loan repayments during the quarter, showing that many businesses are still reducing existing borrowing as well as taking out new finance. SME deposit balances were also lower than a year earlier, while overdraft use increased.
Business confidence weakened during the second quarter, and future interest-rate movements remain uncertain. Businesses should therefore test whether repayments would remain affordable if sales fall, costs rise or borrowing rates change. Regularly watching your key monthly figures helps you identify problems before approaching a lender.
Update your accounts. Lenders need recent, reconciled figures that clearly show revenue, margins, liabilities and cash reserves. Reliable cloud bookkeeping makes it easier to maintain accurate information.
Prepare a cash flow forecast. Show how much funding is needed, when it will be spent and how repayments will be covered. Include realistic assumptions rather than relying only on an optimistic sales forecast.
Understand your key figures. Be ready to explain your gross margin, customer concentration, debtor days, existing borrowing and recent trading performance.
Resolve obvious weaknesses. Unexplained account movements, overdue tax liabilities and ageing customer debts can make a lender more cautious.
Match the finance to the purpose. Strong cash flow discipline remains important whichever facility you choose.
| Short-payment reason | What it may mean | Recommended next step |
|---|---|---|
| Agreed credit or discount | A valid credit note or agreed discount | Match the evidence and close the balance |
| Shortage, damage or service issue | Part of the supply is disputed | Request evidence and investigate |
| Unilateral set–off | The customer alleges that you owe them money | Obtain written details and open a dispute |
| Administrative error | The wrong amount was entered or duplicated | Reconcile and issue a corrected statement |
| Cash–flow pressure | The customer is paying part to gain time | Agree a firm date or payment plan |
Different lenders apply different pricing, security requirements and approval criteria. Compare the interest rate, arrangement fees, personal guarantees, repayment flexibility, covenants and total amount repayable.
The SME business solutions team can help assess whether a term loan, overdraft, invoice facility or specialist funding arrangement is suitable for your plans.
If your expansion involves both the UK and Ireland, funding forecasts should also reflect different tax systems, VAT rules and currency movements. Our cross-border accounting and tax team can support the planning, while our guide to setting up a company in both the UK and Ireland explains the wider considerations.
Lending activity has improved, but the right time depends on your purpose, repayment capacity and the terms offered. Borrow against a tested business plan rather than a market headline.
Lenders commonly review current accounts, cash flow forecasts, existing debts, credit history, security, trading performance and the proposed use of funds.
Yes. Comparing lenders can reveal differences in cost, flexibility, security requirements and eligibility criteria.
The SME business solutions team can prepare your accounts and forecasts for a funding application. If existing liabilities are affecting cash flow, our recovery and restructuring specialists can review the position. Where a lender or investor requires deeper financial analysis, our forensic accounting team can examine the figures. Speak to SCC Chartered Accountants about preparing a clear and supportable funding case.
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