Moving your use of debt finance from stability to growth

“Gross SME bank lending increased by 9% to £68bn in 2025... as credit conditions eased gradually through the year. External finance remains widely used, with around 50% of smaller businesses using it... This suggests, however, that debt finance is being used for stability rather than growth."

The latest research by the British Business Bank takes a deep dive into the UK funding market and how UK small and medium-sized enterprises (SMEs) are making use of debt finance.

The overall level of gross SME bank lending has increased, which is positive news. But the research shows that debt finance is being used to keep companies afloat amid rising costs, overheads and other financial pressures – not providing funds to actually grow and innovate.

So, what can we do to reverse this trend?

4 simple ways to use funding more effectively

With the geopolitical situation so unstable and the costs of operating increasing day by day, it’s understandable that your focus might be survival rather than scaling.

But for a business to have a long-term future, it’s vital to evolve, to grow, to focus on new niches or to reinvest back into new equipment and people. To do this, you need capital.

What can you do to access capital and start refocusing your strategy on growth?

1. Use asset finance to expand your operations:
Hire purchase or asset leasing can be great ways to acquire more advanced machinery or technology for the business. Going the HP/leasing route preserves your working capital while also ensuring the debt is directly tied to increasing your production capacity or improving operational efficiency.

2. Apply for R&D Tax Credits to cover your innovation costs:
By applying for R&D tax relief, you can lower your corporation tax bill and cover any R&D costs you’ve incurred. This helps to bridge the funding gap during innovation cycles and allows you to put this freed-up capital into product development and technical talent.

3. Use mezzanine finance to acquire and expand:
Mezzanine finance combines both debt and equity finance, providing the large sums needed to acquire competitors or complementary businesses. By expanding your business through mergers and acquisitions (M&A) activity, you can instantly gain market share, intellectual property or access to brand-new geographical regions.

4. Apply for export finance to gain a global reach:
Government-backed export guarantees and funding can be accessed to help you sell your products outside the UK. The General Export Facility offers trade finance facilities typically worth up to £25 million. And the Export Working Capital Scheme provides your lender with a partial guarantee for up to 80% of the credit risk of a working capital facility – helping you source the funds needed to drive your export strategy in overseas markets.

Using debt finance to refocus your growth strategy

If you’re currently in survival mode but want to switch to growth mode, come and talk to our team. We’ll work with you to come up with a funding strategy that makes use of all available routes to finance, giving you the capital needed to take your next steps.