The UK Growth Finance Gap: Are Fast-Growing SMEs Getting the Finance They Need?
Some of the UK’s fastest-growing business sectors receive a disproportionately small share of traditional bank lending, according to new research from the Bank of England.
Analysis published on 1 October 2026 found that sectors with greater concentrations of high-growth SMEs tend to account for a smaller share of bank credit and receive finance over shorter periods.
Nearly half of all high-growth SMEs are concentrated in information and communications, professional and scientific activities, and administrative and support services.
Yet together, these sectors accounted for less than 30% of SME lending in 2024, according to the Bank of England’s Examining bank lending to high-growth firms study.
Growing businesses receive different types of finance
The Bank of England combined detailed SME lending information with ONS business data to examine how finance differs between sectors with high and low concentrations of rapidly growing companies.
Its findings reveal a notable difference.
| Measure | Sectors with more high-growth SMEs | Other SME sectors |
|---|---|---|
| Average outstanding bank balances | Around 40% lower | Benchmark |
| Average loan maturity | Around 70 months | Around 108 months |
| Difference in typical loan maturity | Around 38 months shorter | — |
Source: Bank of England – Examining bank lending to high-growth firms, October 2026
Among businesses that do obtain bank finance, average outstanding balances were around 40% lower in sectors containing more high-growth SMEs.
The average maturity of finance was also considerably shorter at approximately 70 months, compared with 108 months in other sectors.
High-growth sectors were more likely to use shorter-term facilities such as hire purchase and less likely to rely on longer-term lending such as commercial mortgages.
Why can fast-growing businesses be harder to finance?
The findings do not necessarily mean banks are deliberately restricting finance to growing companies.
Instead, the Bank of England research highlights a fundamental difficulty with the way some modern businesses are valued.
Traditional lending is often easier where a company owns physical assets that can be used as security.
A growing technology or professional-services business may instead hold much of its value in software, intellectual property, data, specialist knowledge or future contracts.
These assets can be much harder for a traditional lender to use as security if a business fails.
Fast-growing companies may also prioritise expansion ahead of short-term profitability, creating another challenge for lending models that place significant weight on historic profits, existing assets and predictable cash flow.
This is particularly relevant to the information and communications sector, where intangible assets can represent a substantial proportion of a company’s value.
SMEs still rely heavily on banks
The apparent funding gap matters because smaller businesses have fewer alternatives than larger companies.
Separate Bank of England research published in September 2026 found that bank lending still accounts for at least 65% of outstanding SME debt.
SME debt relative to the size of the UK economy has also declined, from around 12% of GDP in 2011 to below 10% in the first quarter of 2026.
The full analysis is available in the Bank of England’s Who finances UK business? research.
At the same time, demand for finance has not disappeared.
The British Business Bank Small Business Finance Markets Report 2026 found that around half of smaller UK businesses were using external finance by the third quarter of 2025.
Gross SME bank lending increased 9% to £68 billion during 2025, its second-highest level since 2012 outside the pandemic period.
There has also been a significant change in who is providing that finance.
According to the British Business Bank, challenger and specialist banks accounted for 60% of gross SME lending in 2025, compared with just 39% in 2012.
Business borrowing remains expensive
While SME borrowing has started to grow again, the cost of accessing it remains significant.
The Bank of England’s Money and Credit statistics for August 2026 show SMEs borrowed a net £900 million from banks and building societies during the month.
Annual SME borrowing growth increased to 4.6%.
However, the average effective interest rate on newly issued SME bank loans reached 6.63% in August, compared with 5.57% across new lending to UK non-financial businesses overall.
That difference can become increasingly important as funding requirements grow.
For SMEs planning to recruit staff, buy equipment, take on larger contracts or expand into new locations, the structure and duration of finance can be just as important as whether funding is technically available.
Alternative finance is becoming more important
The Bank of England’s findings also help explain why growing businesses increasingly look beyond traditional term loans.
Its Agents’ Summary of Business Conditions for July 2026 reported that banks remained willing to lend but were more selective towards some SMEs, particularly companies in construction and hospitality.
The same report noted increasing use of asset finance and invoice discounting.
Different types of business finance can address different growth requirements.
Asset finance can allow a company to purchase machinery, vehicles or equipment without paying the full cost upfront.
Invoice finance can release cash tied up in invoices where customers pay on 30, 60 or 90-day terms.
Revolving credit facilities can provide businesses with flexible access to additional working capital, while unsecured and secured business loans can support larger planned investments.
Businesses considering borrowing can also review fast and affordable business loan options through British Business Funding. Finance is subject to lender approval, eligibility, credit assessment and individual terms, and borrowing should only be considered where repayments are affordable and appropriate for the business.
For businesses with intellectual property rather than substantial physical assets, the market is also beginning to change.
The Government announced in July 2026 that £500 million would be allocated through the British Business Bank’s ENABLE Guarantee programme to encourage lending to SMEs and scaling companies with significant intellectual-property assets, a development also discussed in the Bank of England’s high-growth lending analysis.
John Carter, Managing Director of British Business Funding, said:
“The interesting point in this research is that some of the businesses growing fastest are not necessarily those that fit most neatly into traditional lending models.
“A company investing heavily in technology, people or intellectual property can be a strong and growing business without having the same physical assets as a manufacturer or property-backed company.
“That makes understanding the wider finance market increasingly important for SMEs.
“A traditional bank loan might be the right solution for one business, while another may be better suited to asset finance, invoice finance, a revolving facility or funding from a specialist lender.
“Businesses looking to grow should consider the structure of the finance as well as the headline interest rate. The right facility needs to match how and when the investment is expected to generate revenue.”
What the findings mean for UK business growth
The Bank of England is careful to point out that its analysis does not prove banks are misallocating finance or that every high-growth SME struggles to borrow.
Different industries naturally require different funding structures.
However, the research raises an important question about whether a financial system traditionally designed around physical assets and predictable historical cash flows is keeping pace with an economy increasingly driven by technology, intellectual property and knowledge-based businesses.
With almost half of high-growth SMEs concentrated in just three sectors that receive less than 30% of SME bank lending, businesses looking to scale may increasingly need to consider a broader range of funding sources rather than relying exclusively on their existing bank.
Methodology
The primary research used in this analysis was published by the Bank of England on 1 October 2026 and can be read in full here: Examining bank lending to high-growth firms.
The Bank combined SME financial-account information supplied through the Commercial Credit Data Sharing framework with high-growth business indicators from the ONS Business Structure Database and private-equity data.
High-growth SMEs were defined as businesses with annual turnover below £30 million and average annual employment growth greater than 20% per year over three years.
The Bank of England describes the analysis as descriptive rather than causal. The lending dataset covers major banks and selected non-bank lenders and does not represent the entirety of the UK SME finance market, including all challenger and specialist lenders.