Market volatility and intensifying competition are now the primary concerns for specialist lenders, research from Interpath, conducted in collaboration with J.P. Morgan, revealed.
The 2026 Interpath Specialist Lender Survey, which gathered insights from more than 75 lenders with a combined loan book of £41.8bn, showed that macroeconomic stress remains the dominant challenge facing the sector.
However, competition has risen sharply up the agenda, with 25% of respondents now identifying it as their main concern, up from just 9% last year.
The findings also highlighted growing concerns around sector risk, with an increasing number of lenders reporting rising defaults.
Issues such as fraudulent originators and borrowers also emerged as key challenges for the first time, reflecting a more complex and pressured operating environment.
Despite these headwinds, ownership transition within the sector progressed.
Founder ownership remained prevalent, present in 81% of firms, although recent deal activity, including acquisitions of specialist platforms, signals ongoing strategic interest.
While private equity investment remained selective, this is increasingly being supplemented by trade buyers, banks and private credit providers as confidence in the sector builds.
Growth ambitions remained firmly in place, although access to capital is becoming a constraint.
More than one in five lenders reported insufficient equity to support expansion over the next 12 to 24 months, while 33% are considering raising capital within the next year.
At the same time, 93% of firms expected to renew, amend or increase their debt facilities over the next one to two years, underlining the importance of funding strategy.
Stuart Mogg, managing director and head of financial services capital and debt advisory at Interpath, said: “This year’s survey shows a sector that is both maturing and being tested.
“While momentum in the ABS markets and sustained investor appetite continue to underpin activity, specialist lenders are operating in an environment where macroeconomic uncertainty, intensifying competition and rising cases of fraud in the sector are increasingly intertwined, with subtle signs of unease emerging in certain segments of the industry.
“Fundamentally, this needs a measured and considered response to ensure an appropriate response at a firm level, but also from the industry as a collective.
“Against this backdrop, firms are having to balance near term resilience with long-term strategic change. The pressure on equity availability, growing scrutiny of funding structures, and the slow pace of founder succession all point to an industry facing meaningful structural decisions.
“At the same time, the strong emphasis on product diversification, technology investment and debt refinancing signals that lenders remain focused on building scalable, futureproof platforms. Taken together, these dynamics suggest that 2026 could be a defining year for the Specialist Finance industry.”
Ben Tucker, securitised products group sales at J.P. Morgan, added: “This year’s survey highlights an evolving market, both in terms of competitive dynamics and expectations around capital – relationships with funders appear to remain critical whilst structural flexibility and covenants are more in focus than historically.
“As specialist lenders prove their scalability, institutional investors, particular venture capital firms, look to be more comfortable investing in the market. As this trend develops a clear capital strategy will be key for lenders.
“The equity pressures identified in the survey are plain to see, with 22% of lenders not having sufficient equity over the next 12 to 24 months, whilst only 1% are considering an exit in the next year, down from 7% last year, presumably in part due to the biggest challenge flagged – macro-economic stress.
“However, we continue to see robust demand for high quality issuance and a growing pool of institutions willing to back well-structured platforms.
“The lenders that combine rigorous underwriting with a thoughtful capital strategy will be best positioned to capture that demand as the sector enters its next phase of maturity.”
