UK Finance’s latest Business Finance Review for Q2 2025 found gross lending to small and medium-sized enterprises (SMEs) was up 8% year-on-year, but this growth was slower than the 14% seen last quarter.
For smaller businesses, new lending in Q2 was 28% higher than a year ago, with more new loan approvals.
Net lending stayed close to positive, while new overdraft approvals dropped back.
Loan approvals for medium-sized SMEs fell again compared to last year, which is expected to slow overall lending next quarter.
Total business deposits kept falling, but at the slowest rate since Q3 2022.
Deposits were a fifth below the peak, mostly due to businesses running down their sight deposits.
Overdraft use stayed steady for both small and medium firms and repayments fell slightly across all sectors.
Gary Thompson, sales director at Asset Advantage, said: “Given the critical role of SMEs in the UK economy, it is hugely positive to see lending increase.
“Such is the current climate, we need lenders to keep coming to the table and provide suitable support.
“What is encouraging is that alongside the established big retail banks and lenders, we also have more specialist funders and providers who are actively filling gaps in appetite and risk not met by the rigid processes of the larger banks.”
Thompson added: “As pressures on this segment of the market look set to increase, this must continue.
“It’s imperative that lenders approach deals with an open mind.
“While we know that some businesses may be looking to fund more short-term needs instead of strategic investments, we have been encouraged to see businesses who are looking to expand, invest and scale.”
He said: “It’s all about giving SMEs the confidence to push ahead and providing commercial brokers with the right tools to facilitate these deals.”
