In recent months, access to finance has improved for small and medium-sized businesses. High street bank lending to SMEs reached £4.6 billion in the first quarter of 2025 — the highest level since mid-2022 — with lending to the smallest businesses up nearly 30% year-on-year. Conditions are easing, interest rates have fallen and then held steady, and businesses have more choice about who they borrow from and on what terms. 

Businesses with Covid-era borrowing may be approaching the end of their loan terms. While interest rates are higher than they were five years ago, there are still opportunities to borrow at a reasonable rate. Even those not yet at the end of their loan term may benefit from refinancing — extending repayments over a longer period at a lower rate can significantly improve cash flow and provide breathing space for growth. 

Crawfurd Walker, our CFO, reviews the funding options for small businesses:

Traditional Lenders vs Alternative Lenders 

Broadly speaking, there are two main categories of lender available to small businesses. 

Traditional high street lenders tend to offer slightly lower interest rates and are often a strong option for well-established businesses with solid financial records. However, they can be risk-averse and selective about the sectors they support, and their due diligence processes are typically thorough and can take longer than many business owners expect. 

Challenger and specialist lenders now hold over 60% of the SME lending market. These lenders are generally more flexible in their approach, often move more quickly in their decision-making, and can offer more tailored lending structures to suit specific business needs. The trade-off is that rates may be slightly higher. 

Sometimes a combination of funding types is the best solution. We recently worked with a swim school to secure a high street bank loan to finance a new pool — a long-term investment that will improve revenue and profitability — alongside further funding for wider business expansion and the deposit element of the bank loan. 

We have also worked with a company supplying equipment into the defence sector, where funding is notoriously challenging. Many lenders have covenants that prevent them from supporting businesses operating in that space. Using three alternative funders, we structured a complete package: asset-backed lending against outstanding invoices, and cash flow lending to support materials and the manufacturing process through to delivery. 

Types of Funding Options for Small Businesses Worth Knowing About 

It is worth understanding the range of products available, as the right solution will depend on the purpose of the funding and the profile of the business. 

Term Loans 

The most common form of business finance — a fixed amount borrowed over an agreed period, suitable for capital investment or expansion. 

Asset Finance 

Allows businesses to spread the cost of equipment, vehicles, or machinery, preserving cash flow while still investing in the business. 

Invoice Finance 

Releases cash tied up in unpaid invoices, providing working capital without taking on additional debt. Invoice finance has become less accessible through high street banks but remains widely available through specialist providers. 

Revolving Credit Facilities and Overdrafts 

Provide flexible, short-term working capital, though approval rates for overdrafts have tightened recently. 

Government-Backed Schemes 

It is also worth being aware of government support available in the market. The Growth Guarantee Scheme, administered by the British Business Bank, helps lenders support more SME lending by taking on a portion of the risk — making finance accessible to businesses that might not otherwise qualify. Regional investment funds and innovation grants may also be available depending on your sector and location, and these windows can open and close quickly, so it pays to stay informed. 

Don’t Rely on a Single Lender 

Fewer than 40% of small businesses currently consider multiple funding options. This is a missed opportunity. The market is now broad enough that shopping around — or working with an advisor who can do that on your behalf — will often result in better terms, a more appropriate product, or a lender better suited to your sector. 

Prepare to Secure the Best Rates 

While market conditions are improving, preparation remains critical to access the best rates. Lenders want to feel confident they will be repaid, and businesses that present themselves well are more likely to secure favourable terms. We always recommend having the following in place before approaching any lender. 

Strong Financial Records 

Clear and up-to-date management accounts are essential — including accurate profit and loss statements, a well-managed debt book, and reliable cash flow information. Business owners must be able to demonstrate that their organisation is well run, financially disciplined, and in control of its numbers. 

A Clear Business Plan 

Lenders want to understand what their money will be used for and how it will support growth or stability. A detailed plan should outline the purpose of the funding and show how it will generate returns. Simple financial modelling that demonstrates your ability to service repayments will help both you and the lender feel confident in the numbers. 

A Good Credit Score 

A solid credit history is vital. Business owners should review their credit profile and take steps to improve it wherever possible — simple actions can make a meaningful difference. The stronger your credit standing, the more attractive you are to lenders and the less likely you are to face requests for personal guarantees. 

An Awareness of Your Sector’s Lending Profile 

Some sectors — defence, hospitality, construction — attract more scrutiny or lender restrictions. Knowing this in advance allows you to target the right lenders from the outset and avoid wasting time with those unlikely to support your business. 

Timing It Right 

The funding landscape for small businesses is currently more positive than it has been in recent years. With slightly lower interest rates and more lenders active in the market, opportunities are expanding. Timing plays a key role — high street lenders often have lengthy due diligence processes, so beginning conversations early gives you more options and a better chance of securing the most suitable funding partner. 

Success largely depends on good preparation. Solid financial records, a clear use for the funds, strong credit, an understanding of the lender landscape, and early engagement will give your business the best possible chance of securing finance on favourable terms. 

If navigating all of this feels complex, that is exactly where an experienced advisor can add real value.  Contact Crawfurd Walker to chat through your business finance needs and he can help you to find the best funding options and solution for your business.