The Intermediary – October 2025 - Flipbook - Page 60
SPECIALIST FINANCE
Opinion
S
mall to medium
enterprise (SME) lending
is beginning to edge
back, with momentum
in 2025 becoming harder
to ignore. Lending to
small and medium-sized businesses is
increasing, applications are climbing,
and more firms are beginning to
choose investment in their future
rather than taking on finance simply
to cover shortfalls.
While there is still an air of caution
in the market, the overall signals are
positive, and from my perspective it is
clear that brokers sit at the very centre
of this change.
Lending growth
Figures from UK Finance show that
gross lending to SMEs reached £4.6bn
in the first quarter of 2025, marking
the sixth consecutive quarterly
increase, and the highest level since
mid-2022. A run of consecutive rises
like this maers. It suggests that what
we are seeing is not a one-off recovery,
but part of a more sustained upward
trend in demand and supply.
The most striking growth was
among the smallest firms, with
lending to businesses turning over
less than £2m increasing by 30%
compared with the same period a year
58
The Intermediary | October 2025
earlier. This is particularly significant,
because these businesses have oen
been the most cautious since the
pandemic, choosing to delay plans or
rely on reserves rather than commit
to new borrowing. The fact that they
are now returning to the market
suggests that confidence is not limited
to larger or more established firms,
but is filtering through to the smaller
companies that form the backbone of
the UK economy.
What I see day-to-day certainly
reflects this. Many owners who
postponed decisions during the past
few years are now taking action, oen
aer lengthy periods of hesitation.
They are doing so not to patch over
short-term challenges, but to pursue
transactions that allow them to grow
and progress. It is a change in tone that
feels quite different from the stop-start
paerns of the recent past.
Confidence moving
Equally important is the type of
borrowing now taking place. The
latest figures show that working
CONOR MCDERMOTT
is director of SME
lending at LHV Bank
capital loans fell by 24% in the second
quarter of 2025, while refinancing
deals rose by 53% year-on-year, and
applications linked to investment
