UK SME Funding Gap and Access to Finance Statistics 2026
UK SME finance data for 2025 and 2026 pulls in two directions at once. Gross bank lending to smaller businesses reached £68bn in 2025, up 9% year on year, yet UK Finance recorded negative net lending of £1.1bn in Q2 2025 as repayments outpaced new borrowing. External finance use has fallen to 43%, and most finance intermediaries still report supply gaps.
Key statistics
Total UK invoice finance and asset-based lending advanced to businesses, 2025. Source: UK Finance
UK businesses using invoice finance and asset-based lending, 2025. Source: UK Finance
Combined annual turnover of businesses supported by invoice finance and asset-based lending, 2024. Source: UK Finance
UK small businesses using external finance, Q3 2024. Source: British Business Bank
UK small businesses using external finance, Q3 2023, for comparison. Source: British Business Bank
Finance intermediaries reporting supply gaps across all business stages. Source: British Business Bank
Finance intermediaries reporting supply gaps specifically for start-ups. Source: British Business Bank
Small businesses reporting low awareness of finance options, 2024, up from 60% in 2023. Source: British Business Bank
Gross bank lending to smaller businesses, 2024, up 4.5% year on year. Source: British Business Bank
Share of total smaller business bank lending held by challenger banks. Source: British Business Bank
Gross SME bank lending, 2025, a 9% rise on 2024 and the second highest total in 13 years. Source: British Business Bank
UK Finance net lending to SMEs, Q2 2025. Source: UK Finance
Bank of England net SME borrowing, July 2025, the highest monthly figure since March 2021. Source: Bank of England
Annual growth rate of SME borrowing, July 2025, the highest since August 2021. Source: Bank of England
Total UK SME population, 2025. Source: GOV.UK Business Population Estimates
Proportion of all UK businesses classed as SMEs, 2025. Source: GOV.UK Business Population Estimates
Growth in the total UK business population, 2025 versus 2024, an increase of about 191,000 businesses. Source: GOV.UK Business Population Estimates
Small businesses expecting to shrink, sell up or close within a year. Source: FSB Small Business Index, Q2 2026
Small businesses anticipating growth over the next year, for comparison. Source: FSB Small Business Index, Q2 2026
Bank of England base rate, last changed 18 March 2026. Source: Bank of England
| Metric | Value | Source |
|---|---|---|
| Total UK invoice finance and asset-based lending advanced to businesses, 2025 | £22.7bn | UK Finance |
| UK businesses using invoice finance and asset-based lending, 2025 | 40,000+ | UK Finance |
| Combined annual turnover of businesses supported by invoice finance and asset-based lending, 2024 | £315bn+ | UK Finance |
| UK small businesses using external finance, Q3 2024 | 43% | British Business Bank |
| UK small businesses using external finance, Q3 2023, for comparison | 50% | British Business Bank |
| Finance intermediaries reporting supply gaps across all business stages | 84% | British Business Bank |
| Finance intermediaries reporting supply gaps specifically for start-ups | 90% | British Business Bank |
| Small businesses reporting low awareness of finance options, 2024, up from 60% in 2023 | 69% | British Business Bank |
| Gross bank lending to smaller businesses, 2024, up 4.5% year on year | £62bn | British Business Bank |
| Share of total smaller business bank lending held by challenger banks | 60% | British Business Bank |
| Gross SME bank lending, 2025, a 9% rise on 2024 and the second highest total in 13 years | £68bn | British Business Bank |
| UK Finance net lending to SMEs, Q2 2025 | -£1.1bn | UK Finance |
| Bank of England net SME borrowing, July 2025, the highest monthly figure since March 2021 | £0.7bn | Bank of England |
| Annual growth rate of SME borrowing, July 2025, the highest since August 2021 | 0.9% | Bank of England |
| Total UK SME population, 2025 | 5.7 million | GOV.UK Business Population Estimates |
| Proportion of all UK businesses classed as SMEs, 2025 | 99.9% | GOV.UK Business Population Estimates |
| Growth in the total UK business population, 2025 versus 2024, an increase of about 191,000 businesses | 3.5% | GOV.UK Business Population Estimates |
| Small businesses expecting to shrink, sell up or close within a year | 32% | FSB Small Business Index, Q2 2026 |
| Small businesses anticipating growth over the next year, for comparison | 18% | FSB Small Business Index, Q2 2026 |
| Bank of England base rate, last changed 18 March 2026 | 4.50% | Bank of England |
Source: UK Finance, British Business Bank, Bank of England, GOV.UK Business Population Estimates, FSB Small Business Index, Q2 2026
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### UK SME Funding Gap and Access to Finance Statistics 2026: key figures | Metric | Value | Source | | --- | --- | --- | | Total UK invoice finance and asset-based lending advanced to businesses, 2025 | £22.7bn | UK Finance | | UK businesses using invoice finance and asset-based lending, 2025 | 40,000+ | UK Finance | | Combined annual turnover of businesses supported by invoice finance and asset-based lending, 2024 | £315bn+ | UK Finance | | UK small businesses using external finance, Q3 2024 | 43% | British Business Bank | | UK small businesses using external finance, Q3 2023, for comparison | 50% | British Business Bank | | Finance intermediaries reporting supply gaps across all business stages | 84% | British Business Bank | | Finance intermediaries reporting supply gaps specifically for start-ups | 90% | British Business Bank | | Small businesses reporting low awareness of finance options, 2024, up from 60% in 2023 | 69% | British Business Bank | | Gross bank lending to smaller businesses, 2024, up 4.5% year on year | £62bn | British Business Bank | | Share of total smaller business bank lending held by challenger banks | 60% | British Business Bank | | Gross SME bank lending, 2025, a 9% rise on 2024 and the second highest total in 13 years | £68bn | British Business Bank | | UK Finance net lending to SMEs, Q2 2025 | -£1.1bn | UK Finance | | Bank of England net SME borrowing, July 2025, the highest monthly figure since March 2021 | £0.7bn | Bank of England | | Annual growth rate of SME borrowing, July 2025, the highest since August 2021 | 0.9% | Bank of England | | Total UK SME population, 2025 | 5.7 million | GOV.UK Business Population Estimates | | Proportion of all UK businesses classed as SMEs, 2025 | 99.9% | GOV.UK Business Population Estimates | | Growth in the total UK business population, 2025 versus 2024, an increase of about 191,000 businesses | 3.5% | GOV.UK Business Population Estimates | | Small businesses expecting to shrink, sell up or close within a year | 32% | FSB Small Business Index, Q2 2026 | | Small businesses anticipating growth over the next year, for comparison | 18% | FSB Small Business Index, Q2 2026 | | Bank of England base rate, last changed 18 March 2026 | 4.50% | Bank of England | Source: UK Finance, British Business Bank, Bank of England, GOV.UK Business Population Estimates, FSB Small Business Index, Q2 2026
“Net lending figures net off new borrowing against repayments and debt pay-down, so a negative net lending figure does not mean lending activity has stopped, it can mask brisk gross lending being offset by SMEs clearing higher-cost balances. The Bank of England, UK Finance and British Business Bank series also use different panels and definitions of what counts as an SME, so figures should be read as directional rather than reconciled to one single number.”
What the numbers mean
Two data sets that should tell the same story currently point in different directions. Gross bank lending to smaller UK businesses rose to £68bn in 2025, a 9% increase and the second highest total in over a decade. But UK Finance's net lending figure, which nets new borrowing against repayments, stayed negative through most of the year.
That combination means banks are writing plenty of new facilities, but existing borrowers are paying down debt and running down credit balances at least as fast, so the overall stock of business lending is not growing. The Bank of England's own monthly data shows the same pattern turning, with July 2025 posting the strongest net SME borrowing figure since March 2021, an early signal rather than a trend reversal.
Underneath the lending numbers sits a persistent gap between supply and demand. British Business Bank intermediary research found 84% of finance brokers and advisers see supply gaps regardless of a business's stage, rising to 90% for start-ups, and just 43% of small businesses used any external finance at all in the most recent quarter measured, down from 50% two years earlier.
Nearly seven in ten businesses said they were not aware of the finance options open to them. For invoice finance and asset-based lending providers, that awareness gap is the addressable opportunity: a facility secured against the sales ledger sits outside the term-loan and overdraft categories most owners default to when asked about business finance, and it scales automatically with turnover rather than requiring a fresh credit application each time working capital tightens.
FAQs
What is the UK SME funding gap?
It refers to the difference between the finance smaller businesses want or need and what mainstream lenders are willing to supply. British Business Bank research puts this gap at its widest for start-ups, where 90% of finance intermediaries report supply shortfalls, against 84% across businesses at any stage.
Why is net lending to SMEs negative even though gross lending is rising?
Net lending nets new borrowing against repayments. Gross SME bank lending rose 9% to £68bn in 2025, but many businesses were simultaneously paying down existing facilities and cash buffers built up earlier in the decade, which pulled the net figure negative in UK Finance's data.
How can invoice finance help close the funding gap?
Invoice finance releases cash tied up in unpaid invoices rather than relying on a fresh credit assessment each time a business needs working capital. Facilities scale with sales ledger value, which suits growing or seasonal businesses that mainstream term lending is often slow to accommodate.
What proportion of UK small businesses currently use external finance?
43% used external finance in the most recent British Business Bank measure, down from 50% two years earlier. Awareness is a factor: 69% of small businesses said they were not aware of the finance options available to them.
Is the Bank of England base rate affecting SME borrowing in 2026?
Base rate sits at 4.50% following the last change on 18 March 2026. Lower rates generally reduce the cost of both bank lending and invoice finance discount charges, though Bank of England data shows SME borrowing growth only turned positive again from mid-2025.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
Last reviewed: 25 July 2026