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UK Funding Market and Budget 2025 - What every business owner should watch

Greg Taylor · Posted on: November 20th 2025 · read

The funding landscape for SMEs is more dynamic now than it’s been in many years.

On the one hand, more sources of capital are available than ever before to both SME’s and Corporate businesses alike.

On the other hand, macro-pressures and policy shifts mean that knowing when to borrow has become more complicated.

So, as we approach the Autumn Statement, it’s worth thinking not just about ‘today’s funding options’, but how government policy could shift the terrain over the coming months.

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As debt advisors the Banking & Finance Team here at MHA speak with both businesses seeking finance or advice on funding structures and their lenders every day… In our view here’s what you should know about raising business finance as we head towards Budget Day, and what should the UK Government do to help businesses to thrive in 2026, not just survive!

Autumn Budget 2025 Summary

Our quick access guide will provide you with clear and precise explanations of the new tax proposals announced in the Autumn Budget.

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1. Funding is more available — but many SMEs remain hesitant

There’s cause for optimism: overall SME lending is rebounding. But many business owners or management teams are still holding back, citing high costs of borrowing, economic uncertainty, and tighter margins. The demand side (i.e. whether you ‘want’ to borrow) is now as important as the supply side (i.e. whether lending is available).

If you’ve been considering borrowing for an acquisition, buying a new piece of kit / vehicle or even to fund your tax bill then it’s worth re-evaluating your stance: with more providers in the market (Fintech’s, Challenger Banks & Specialist Lenders) the relative cost and flexibility of debt might be more favourable than your thought.

Also, the narrative is shifting: more businesses are looking to invest, grow, upgrade or refinance, not just to survive.

That’s positive, but it also means lenders will scrutinise the ‘purpose’ of the borrowing more carefully. The clearer your business case, the better your chances of securing favourable terms.

2. More lending routes exist — but they vary in structure

The dominance of “big-bank term loan” is less absolute than it used to be. Today, challenger banks, non-bank lenders, asset finance, growth loans, invoice finance and hybrid debt–equity structures are part of the mix.

According to British Business Bank (2024 data): “challenger and specialist banks’ share of total gross lending to SMEs is now 60%!

But these options aren’t one-size-fits-all, and different lenders will assess risk, collateral, repayment flexibility and sector bias differently.

Getting the right advice is the best approach that can help you avoid costly mismatches; plus ensure you have the right structure for the funding you require.

challenger and specialist banks’ share of total gross lending to SMEs is now 60%!

British Business Bank (2024 data)

With High inflation, wage pressures, supply chain costs and general economic uncertainty continuing to make many companies cautious about taking on new debt. Even if a facility is offered, drawing on it early (or at all) may become a strategic decision, not just a borrowing decision.

Flexibility will be a differentiator: loans with repayment holidays, break options, or adjustable terms might become more attractive. This is why we’ve seen an increase in companies looking at RCF’s (Revolving Credit Facilities) rather than traditional bank loans.

3. Autumn Statement 2025 — Why it matters for your borrowing chances?

This Autumn Statement is being delivered in a context of tight public finances, rising borrowing costs and pressure to plug fiscal gaps.

Here are three measures I think the Chancellor should take to help business and support economic growth:

Expansion or enhancement of loan guarantee schemes

The Government could look to expand existing guarantee schemes (e.g. via the British Business Bank) or introduce new ones, reducing lender risk and encouraging banks to lend more to SMEs.

Guarantees could cover a higher proportion of default, allow higher loan-to-value levels, or extend to additional asset classes (e.g. green equipment, intangible assets).

This would lead to better access, more favourable terms (lower margins, less collateral) for qualifying businesses.

More attractive capital allowances, investment incentives or tax breaks tied to CAPEX / green transition

If the Chancellor gives generous tax reliefs (super-deductions, accelerated depreciation) especially for sustainable / energy-efficient assets, SMEs will have more incentive to borrow for CAPEX, and lenders will feel more confident in asset-backed deals.

This shifts some of the risk calculation for lenders: better recoverable asset values, stronger business case for investment.

As a result, asset-backed lending (equipment finance, leasing) could see increased demand and looser pricing in some segments.

Regulatory changes increasing pressure on lenders

We need a more commercially sensible approach from the government on the capital demands (Basel 3) that are placed on financial institutions (bank levies or capital charges), lenders are likely to become more cautious particularly about SME risk.

Regulatory changes (e.g. stricter risk weightings for SME debt) will make it more expensive or capital-intensive for banks to lend in this segment, thus tightening credit availability or increasing spreads.

In particular, there has been debate about the removal of the SME supporting factor in bank capital rules, which could raise costs for SME lending. We need this ‘SME supporting factor’ to be a key part of any capital reforms.

No matter how favourable the policymaking, debt works only if your core operations are stable. Late payments, stretched receivables, and volatile inflows are amongst the biggest obstacles for growing firms.

Final thoughts...

As we head towards the Autumn Statement, one thing’s clear, the funding market is changing fast. There’s more choice out there than ever before but knowing when to act and which option suits your business is just as important as securing the funds themselves.

With further tax rises likely when Rachel Reeves takes to her feet in a few weeks’ time, it is entirely possible that a further increase in the rate of CGT could feature, along with removing the reduced rate for Business Asset Disposal Relief (BADR) or introducing a lifetime limit of £1 million of gains that can qualify for BADR.

Any business looking to take a competitive advantage at this moment in time needs to be staying informed with the right professional advisors, ensuring they have solid cashflow management, and making sure their funding structure supports their businesses long-term goals, not just today’s needs.

If you’re thinking about borrowing, refinancing, or simply want to sense-check your current setup, now’s a good time to start those conversations. The MHA Banking & Finance team are here to help you explore your options and make sure your business is in the best position to take advantage of what’s ahead.