Business lending fell in Q3

High street banks’ lending to small and medium-sized enterprises (SMEs) slowed in the third quarter of 2025, according to UK Finance, reaching £4.2 billion.

Year-on-year growth dropped to 6.4%, down from 8.3% in the previous quarter and 14% in Q1. This marks the slowest growth since banks resumed lending to SMEs in early 2024.

UK Finance noted a ‘wobble in already subdued business sentiment in the run up to the Budget, this was likely linked to concerns that businesses would again be called upon to plug a hole in the public finances.’

Gary Thompson, Sales Director at Asset Advantage, said “It is really encouraging to see yet another rise in SME lending, which certainly mirrors what we are seeing on the ground. Speaking with commercial brokers, it is clear that these enterprises are actively pursuing funding that helps them grow – whether that’s through asset finance or expansion-based lending. In fact, our latest data points to asset finance and business acquisitions dominating funding demands in the coming 12 months. As we head into the New Year, this is hugely positive given the important role SMEs play as the engine room of the UK economy.

“Lenders and funders have a critical role to play in facilitating this by making sure they are responsive to the needs of these businesses. Rather than restrictive appetites to risk, we must be open-minded, pragmatic and willing to look outside the box to assist SMEs, support transactions and give brokers the tools they need. In doing so, we can give SMEs the confidence to deploy flexible funding for growth and expansion, rather than plugging short-term gaps.”