Small business bank lending has fallen 30% in three years. Here is where the money is now
Small business bank lending across Great Britain is down £26.8bn since 2022, according to money.co.uk. Where the money is now: a Start Up Loan for firms trading under five years, asset finance, invoice finance and the Growth Guarantee Scheme.
Reading time5 min read
CategoryBusiness guides
Written byThe bizbritain team
Small business bank lending across Great Britain has fallen by £26.8bn in three years, according to money.co.uk. That is 30% of the stock of loans and overdrafts. Nine in ten postcode areas now have less bank credit than they had in 2022. If your bank has said no, or has trimmed your overdraft, this guide explains where the money is now.
Section 01
What the small business bank lending data shows
money.co.uk analysed UK Finance's postcode lending dataset, published on 30 June 2026. The dataset counts loans and overdrafts outstanding to small and medium-sized businesses in every postcode sector in Great Britain.
According to the analysis, the total stood at £62.6bn at the end of 2025. In the second half of 2022 it was £89.5bn. That is a fall of £26.8bn, or 30%. Lending fell by a further £6.5bn during 2025 alone.
The decline is almost everywhere. Of more than 8,500 postcode sectors with active data, nine in ten saw lending fall between 2022 and 2025. The average fall was 36% per sector. Lending shrank in 78% of sectors in the last year.
Where you are based matters too. According to money.co.uk, businesses in the North East have an average of £4.9m of bank lending per postcode sector. In London the figure is £12.5m. In one in eight sectors, lending is so low that UK Finance does not publish the figure at all.
One caveat matters. These figures measure the stock of credit outstanding, not new lending. Part of the fall is pandemic-era loans being repaid. But the total is now 14.5% below its level at the end of 2019, so this is not only the pandemic unwinding.
£26.8bnless bank lending outstanding to small businesses than in 2022, according to money.co.uk.
30%the fall in the stock of loans and overdrafts between 2022 and the end of 2025.
9 in 10postcode sectors with less bank lending than three years ago.
60%of new SME bank lending now comes from challenger and specialist banks, according to the British Business Bank.
Section 02
Is a Start Up Loan better than a bank loan for a new business?
For many new businesses, yes. A bank usually wants trading history and security. A Start Up Loan needs neither.
A Start Up Loan is an unsecured personal loan for business purposes, backed by the government. You can borrow £500 to £25,000 per founder, and up to £100,000 per business where co-founders each apply. There is no application fee and no early repayment fee. The term is one to five years at a fixed rate.
Your business can be pre-launch or trading for up to five years. That last point catches people out. A business that has traded for three or four years, and has just been turned down by its bank, may still qualify.
As a Start Up Loans Business Support Partner, we carry out the assessment ourselves. The finance partner then runs its final checks and provides the funds. Most of our applicants who submit a finished application are approved within one to two weeks. Our free myplan tool builds the business plan, cash flow forecast and personal survival budget in about 30 minutes.
Where established businesses are borrowing instead
The high street bank is no longer the main source of small business credit. According to the British Business Bank, quoted in the same analysis, challenger and specialist banks now provide 60% of new SME bank lending. In 2012 it was 39%.
Four routes are doing most of the work.
Asset finance
Finance secured on the equipment, vehicle or machinery you are buying. The asset is the security, so the lender relies less on your trading history.
Invoice finance
An advance against unpaid customer invoices. It suits businesses with healthy sales and slow-paying customers.
Term loans from specialist lenders
Challenger banks and specialist lenders compete on speed and on appetite for risk. Terms vary widely from one lender to the next, which is why comparing across the market matters.
The Growth Guarantee Scheme
A government-backed guarantee that helps accredited lenders say yes to viable businesses. The Growth Guarantee Scheme supports facilities of up to £2m per business group. It is open to firms with turnover of up to £45m. You remain fully liable for the debt, and a lender can still ask for a personal guarantee.
Section 04
What lenders look for now
Lenders weigh four things: trading history, cash flow, your credit profile and what the money is for. According to money.co.uk, a business that knows why it was declined can often fix the reason before it applies again.
Three things help most.
Up-to-date management accounts, not just last year's filed accounts.
A 12-month cash flow forecast that shows how the repayments will be met.
A clear purpose for the money: stock, a vehicle, a hire, a premises.
Your bank is one lender with one credit policy. The data shows the high street lending less almost everywhere, so a no often reflects that policy rather than your business. In our experience, the smaller lenders competing for new customers ask different questions and reach different answers.
A decline is a reason to widen the search, not to stop it.
Section 05
Where bizbritain fits in
bizbritain is a broker. We match your business to the lender most likely to say yes, and we stay with the deal until it completes.
If you have been trading for under five years, we can assess you for a Start Up Loan. If you are established and need £25,000 or more, we look at the deal across a wider range of lenders than any one bank can offer. That covers term loans, asset finance, invoice finance and government-backed facilities.
The first step is a conversation about business growth finance and what your business actually needs. We will give you the realistic version before you apply anywhere.
This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.
Got a question the guide didn’t answer? Talk to an advisor.
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