New Data Shows Sharp Rise in SME Borrowing Across the UK

Demand for business finance among UK SMEs has surged, with new figures revealing a 63 per cent year on year increase in applications for personal guarantee backed lending during the second quarter of 2026. The rise highlights the growing pressure many businesses face as they seek additional funding to manage rising costs while continuing to invest for future growth.

The latest data from Purbeck Insurance Services shows the increase in borrowing is being driven by a combination of short term financial pressures and long term expansion plans. Average loan values remained above £300,000 for the second consecutive quarter, reaching £317,000, suggesting businesses are taking on larger levels of finance than in previous years.

Working capital remained the primary reason businesses sought funding, accounting for more than a third of all applications. This reflects the continued challenge of managing day to day operating costs, including payroll, supplier payments and overheads, at a time when many firms are still navigating economic uncertainty. At the same time, almost half of borrowing was linked to growth related activity, including investment in assets, acquisitions and business expansion, indicating that many SMEs remain confident enough to invest despite ongoing pressures.

One of the more notable findings was the increasing appetite for finance among start up businesses. For the first time in more than a year, new businesses borrowed more on average than established firms, with average loan values reaching £345,000. The figures suggest entrepreneurs are entering the market with ambitious growth plans but also face higher capital requirements to launch and scale their operations.

The latest figures also reflect a broader recovery in SME lending across the UK. According to UK Finance, lending to small and medium sized businesses increased by 16 per cent year on year to £5.3 billion during the first quarter of 2026, signalling renewed demand for external finance as businesses pursue investment opportunities and strengthen cash flow.

For many SMEs, access to finance remains one of the biggest determinants of future growth. While borrowing inevitably increases financial commitments, the latest data suggests many business owners are viewing lending not simply as a way to manage rising costs but as a tool to expand, invest and improve long term competitiveness.

As economic conditions continue to evolve, lenders and policymakers will be watching closely to see whether this increased appetite for finance translates into stronger business investment, higher productivity and sustained growth across the UK's SME sector.