Banks and building societies made less credit available to small businesses in the three months to the end of August. That is the main small-business finding of the Bank of England's Credit Conditions Survey for the third quarter of 2026, published on 8 October.
Lenders also said small businesses asked for less borrowing. And they reported no rise in defaults on the loans they had already made.
01What lenders said in the Credit Conditions Survey
The Credit Conditions Survey asks lenders every quarter how their lending has changed. This round ran from 17 August to 4 September 2026.
For small businesses, lenders reported four things:
- Availability fell. Less credit was available to small businesses than in the previous three months. The same was true for medium-sized firms.
- Demand fell. Small businesses asked for less borrowing. Lenders expect demand to fall slightly again in the three months to the end of November.
- Defaults did not change. Default rates on loans to small businesses were unchanged.
- Prices did not change. Spreads on small-business loans, the margin lenders add on top of Bank Rate or market rates, were also unchanged.
Credit for large businesses was unchanged. So the fall was concentrated on smaller firms.
02Why flat defaults matter
The survey does not say why lenders cut back. But a rise in bad debts would usually show up in the default figures, and it did not.
That suggests the change came from the lenders' side. It points to their appetite for small-business lending, rather than to small firms suddenly becoming riskier.
It matches what the Bank of England's agents reported in September. Lenders had money to lend, but many preferred bigger firms.
03If your bank has just said no
A no from one bank is not a verdict on your business. Lenders differ in what they will fund, and the high-street banks tend to cluster around similar rules.
Start with why. Ask the bank for its reasons, and check your credit file before you apply anywhere else. Several applications close together can count against you.
Then look wider. Specialist and alternative lenders, asset finance and invoice finance all work differently from a bank overdraft or loan. For an established business, business growth finance from a wider panel can fill the gap a bank has left.
If your bank has cut an existing facility, our 30-day plan for when your bank cuts your overdraft sets out what to do first. For the longer picture, see where small-business lending has gone as banks pulled back.
The next Credit Conditions Survey is due on 14 January 2027.
