This insight was written by Andy Quinn, Banking & Finance Director at MHA.
Access to appropriate funding remained a key consideration for UK small and medium-sized enterprises. During 2025, the SME lending market continued to evolve, influenced by stabilising economic conditions, changing bank strategies, and the increasing role of challenger and specialist lenders.
An active but evolving lending market
SME lending volumes increased during 2025, particularly in the first half of the year. High street banks reported their strongest quarterly lending levels since 2022, reflecting improved confidence following a prolonged period of economic and interest rate uncertainty.
While funding was available, lenders’ appetite, product focus, and decision-making criteria continued to change. Many SMEs experienced a more selective approach from traditional banks, alongside a broader range of options from alternative providers.
High Street Banks: Selective growth
The major UK banks remained active participants in SME lending throughout 2025, particularly for established businesses with a demonstrable trading history and lower-risk funding requirements.
Lending by product type
- Term loans Term loans remained the most widely used form of SME finance, offered by both banks and alternative lenders.
- Overdrafts Overdrafts continued to be available, although demand softened later in the year as businesses sought greater certainty around costs and repayments. A good alternative, for the right business, would be an RCF (Revolving Credit Facility) as it offers more flexibility that an overdraft around repayment options.
- Invoice finance Invoice finance became less accessible through high street banks but continued to be offered by specialist providers, and remains a great way to access working capital for a business
- Asset finance Asset finance remained a key funding option, supporting investment in equipment, vehicles, and machinery.
Overall, lenders increasingly focused on clearly defined, purpose-driven funding rather than open-ended facilities.
Implications for SMEs
For SMEs, the 2025 lending environment presented both opportunity and complexity. While funding was available, it was not always accessible through traditional routes. At the same time, the breadth of lenders and products now available means that understanding the market has become more important than ever.
Businesses that took a structured approach to funding decisions, supported by clear financial information and professional advice, were typically better placed to secure appropriate finance on suitable terms.
How MHA’s Banking & Finance Team supports SMEs
Navigating the SME lending market can be challenging, particularly as lender criteria and product availability continue to evolve. MHA’s Banking & Finance team provides independent, practical support to help businesses secure funding that aligns with their objectives.
We work alongside management teams to:
Clarify funding requirements
Helping businesses assess their funding needs and understand the full range of available finance options.
Prepare robust funding proposals
Supporting the preparation of financial information, forecasts, and funding submissions that meet lender expectations.
Engage with appropriate lenders
Drawing on established relationships across high street banks, challenger banks, and specialist lenders to identify suitable funding partners.
Support negotiations and decision-making
Assisting businesses in reviewing lending terms, covenants, and conditions to enable informed decision-making.
Support growth and change
Advising on funding solutions for growth, acquisitions, refinancing, and periods of transition.
Through a clear, structured, and independent approach, MHA helped SMEs navigate a busy and evolving lending marketplace with confidence during 2025.
For more information
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