High street banks increased lending to small and medium-sized enterprises (SMEs) in Q1 of 2025, reaching £4.6bn.
This marked the sixth quarter in a row of rising lending and was the highest figure since Q2 2022.
The increase stood at 14% year-on-year, with sectors like agriculture, manufacturing, wholesale and retail, and health seeing most of the growth.
Lending was particularly strong among the smallest businesses, with those turning over up to £2m a year seeing lending up nearly 30% compared to the same period the year before.
Lending to medium-sized businesses rose by 9%.
Approvals for loans and overdrafts also went up year-on-year.
Approvals for new loans were 37% higher than in Q1 2024, with overdraft approvals up by 8%.
Most sectors saw more approvals, although the total value of these approvals fell compared to last year.
Utilisation rates stayed steady at around 50%, showing that businesses kept some headroom within their current finance facilities.
David Raw, managing director of commercial finance at UK Finance, said: “SMEs are a vital part of the UK economy, and it is encouraging that lending to them continues to go up.
“It is particularly welcome to see small businesses specifically accessing greater levels of finance than this time last year.
“The regulatory environment is important and that is why we think the government should make the Growth Guarantee Scheme permanent and increase the size of the scheme’s budget.”
Raw added: “This would help support even more SME lending.
“Banks have finance available for SMEs, enabling them to invest and grow.
“The industry will continue to work with businesses, government and regulators to support both the supply and demand of finance, driving economic growth.”
