SME lending hit £4.6bn in Q1
Lending to small businesses by high street banks hit the highest level since 2022, a sixth consecutive quarterly rise in the opening three months of 2025. UK Finance data showed that lenders issued £4.6 billion worth of loans in Quarter 1 (Q1), with this a 14% year-on-year jump.
This represents a 14 per cent increase year-on-year, with the rise driven by agriculture, manufacturing, wholesale and retail, and health sectors. Lending to the smallest businesses (up to £2 million annual turnover) was particularly strong, up nearly 30 per cent year-on-year, whilst lending to medium-sized businesses increased nine per cent.
Loan and overdraft approvals increased year-on-year. Compared with Q1 2024, the number of new loans and overdrafts approved was 37 per cent and eight per cent higher, respectively.
Courtesy Credit-Connect June 15, 2025
Percentage of small businesses that rely on finance hits eight year high
The percentage of small businesses that rely on finance or funding to invest in business growth has reached an eight-year high, and those most in need of it are the enterprises predicting significant expansion for the months ahead, according to new research by Novuna Business Finance.
The nationwide poll of 1,242 small business owners revealed that 58% of business owners said they would have to put one or more growth projects on hold in the coming months if they were unable to secure funding or finance to power their growth plans. This reliance on finance comes at a time when the ripple effect of geo-political disruption is making it harder for small business owners to forecast organic growth. Nationally, the percentage of UK small business owners predicting growth for the three months to the end of June has fallen to a four-year low (29%) – with significant falls in the manufacturing, construction and retail sectors.
Courtesy Credit-Connect 15th May 2025
SME Lending Needs a Reboot
Research by Allica Bank has advised that the SME lending market needs a full reboot, with the UK having the lowest business investment rate in the G7. The report highlights how small businesses invest at only a third of the level of large corporate businesses, with a clear link between low levels of SME finance, low investment, and weak economic growth.
Richard Davies, CEO of Allica Bank, who led the research, said “Our research makes for stark reading, revealing just how much the SME finance market has deteriorated since the 1990s, with record low application rates from SMEs combined with bank lending that‘s focused on low risk, well-collateralised lending that does not meet the needs of the modern UK economy.
“It’s a big positive that challenger banks have stepped up over the past decade and now provide more than half of new SME lending, but the evidence is inescapable that the overall economic outcomes from the UK SME finance market have substantially worsened over recent decades. When you see the data over the long term it is shocking how poorly the current UK market performs compared to both our own history and other countries.
“It’s now vital we fix the SME finance market for the long-term, not as a narrow market issue, but as a key enabler of reinvigorated UK economic growth and productivity.”
Courtesy Credit-Connect UK 29th April 2025