The Intermediary – December 2025 - Flipbook - Page 50
SPECIALIST FINANCE
Opinion
Growth will drive
the next phase of
SME lending
G
iven the current
backdrop of political
and economic
instability, you might
expect the nation’s
small to medium
enterprises (SMEs) to be hiing the
brakes on their future plans. You
may even assume that any borrowing
motivations will be dominated by
access to working capital or short-term
liquidity. While that may be true in
some cases, it’s not the consensus.
There is a growing proportion of
SMEs that view business finance as a
lever for growth. Rather than a shortterm bridge, funding is providing a
strategic tool to enable SMEs to make
that next step forward – investing
in new equipment, improving
infrastructure or even eyeing up
expansion. Speaking with commercial
brokers as part of our most recent
survey, this is a common theme.
Commercial brokers tell us that they
are seeing significant demand among
SME clients for business finance,
particularly around loans to fund a
diverse range of needs and assets, as
well as to fund business acquisitions.
It’s a clear statement of intent from
SMEs not to stand still, but to push
forward with their growth ambitions
and to build long-term resilience. We
shouldn’t just applaud their efforts,
we should be actively encouraging
it – especially when you consider
that SMEs are the engine room of the
UK economy.
Sectors driving demand
According to our survey, nearly half
(47%) of the commercial brokers
surveyed identified construction as the
front-running sector actively driving
this demand for business finance,
closely followed by the hospitality and
leisure sectors (45%).
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The Intermediary | December 2025
The reason for this could be found
in a feature both sectors share: high
upfront capital expenditure and costs.
For construction firms, this can oen
be linked to investment in plant,
equipment and machinery, as well
as compliance upgrades and digital
tools – particularly with increasing
spotlight on building safety and
emission standards. Capex can also
be tied to operational capabilities and
growth, whether it’s increasing project
capacity, productivity or exploring
new areas of work.
For hospitality and leisure,
capex requirements are perhaps
more closely linked to openings,
refurbishments and fit-outs,
equipment and maintenance. This is
an area where we have considerable
experience and success providing
business finance and we know
personally that these costly items are
regularly financed – whether that’s
through asset finance or a business
loan in the right circumstances.
We also cannot overlook the fact
that these sectors have seen significant
pressures in recent years, whether as
a result of the pandemic, persistent
inflation, or successive Budgets. These
events have driven up costs, squeezed
margins and forced some firms into
difficulty or even to fold.
When these sectors face pressure,
strong firms pursue acquisitions
and growth by expansion – driving
demand for business acquisition
funding and commercial finance.
This will remain a contributing factor
into 2026 and beyond, along with the
retirement of current business owners
facilitating moves.
Flexible funding
The data tells us that, in the main,
SMEs are not borrowing just to get
by, they are increasingly borrowing
GARY THOMPSON
is sales director
at Asset Advantage
to build and expand. For commercial
advisers, this is a call to action to make
sure they can respond to the needs of
SME clients. Similarly for funders,
it’s a reminder that we need to support
advisers with flexible funding options
that are sector and asset agnostic, and
can move at the pace of businesses.
For some funders, though, that
is easier said than done. Restrictive
lending policies and low risk appetites
among many mainstream lenders
make it difficult for brokers to provide
adequate support and realise this
demand. Whether it’s so or nonstandard assets, business acquisitions
or sector restrictions and funding
levels, we regularly hear from brokers
who run into challenges elsewhere.
To answer the call of SMEs in a
lending environment that is full
of rigid processes and risk-averse
funders, it’s critical that brokers have
access to strategic funding partners
who are open minded, forward
thinking, and willing to really
understand cases put before them.
At nearly 20 years in business, we
believe we are proof that such funders
do exist. It’s always been central to
our approach and ensures we can
identify more of those viable business
cases and facilitate more transactions
for brokers.
In truth, this approach is essential
today to enable small and mediumsized firms to scale and expand, and
contribute to a UK economy that is in
desperate need of positive growth.
Rather than retreating, more
funders should be coming to the table
to give brokers the tools and support
they need. ●
