UK Business Loan Statistics 2025 & 2026 Outlook
Sep 29, 2025
Introduction
Business loan statistics are essential for understanding how small and medium-sized enterprises (SMEs) in the UK are accessing finance.
In 2025, official UK data from the Bank of England, UK Finance, and the British Business Bank show that lending volumes are rising again after several subdued years.
At the same time, interest rates remain elevated compared with pre-pandemic norms, while company insolvencies continue to put pressure on many sectors.
This article compiles the most up-to-date UK business loan statistics for 2025 and provides a forecast for 2026, using only official government and industry sources.
Business Loan Volumes in the UK (2025)
According to UK Finance’s Business Finance Review (Q1 2025), gross lending to SMEs by the main high-street banks reached around £4.6 billion in the first quarter of 2025.
That represents a 14% increase compared with the same period in 2024. The fastest growth came from the smallest businesses, with annual turnover below £2 million, where new lending was almost 30% higher than a year earlier.
Across all providers, including challenger banks and specialist lenders, the British Business Bank estimates that gross bank lending to smaller businesses totalled £62 billion in 2024, up 4.5% year-on-year.
Challenger banks now account for nearly 60% of all new SME lending, showing how competition has shifted away from the traditional high-street players.
For 2025, the early data indicates that this growth trend is continuing, with approvals also up strongly. Loan approvals in Q1 2025 were 37% higher for term loans and 8% higher for overdrafts than a year earlier.
Average Business Loan Size in the UK
Unlike consumer lending, SME finance varies widely by sector and turnover. Official statistics do not publish one single “average business loan size”, but industry data shows that many small business loans fall in the £10,000 to £25,000 range, while larger firms may borrow millions.
The British Business Bank notes that manufacturing, wholesale and retail trade, agriculture, and healthcare were among the sectors seeing the highest growth in loan approvals in early 2025, while consumer-facing businesses such as hospitality still faced challenges due to elevated insolvency risks.
UK Business Loan Interest Rates (2025)
The cost of borrowing for SMEs in the UK remains above pre-2020 levels. According to Bank of England data, the effective interest rate on new SME loans was around 6.75% in March 2025.
While this is still high, it is beginning to ease as the Bank of England reduces the Bank Rate, which now stands at 4.0% as of September 2025.
Business loan interest rates are expected to continue falling gradually as cheaper central bank rates filter through into lending markets, although the pace will depend on lender risk appetite and funding costs.
For high-quality SMEs with strong security, rates may already be declining, while riskier firms will still pay a premium.
Net Borrowing Trends and Credit Conditions
After several years of net repayments, UK businesses are borrowing again. Bank of England’s Money and Credit release showed that non-financial companies borrowed a net £5.0 billion in July 2025, a reversal from net repayments in June.
Importantly, SME annual lending growth turned slightly positive in mid-2025 for the first time since 2021.
At the same time, the Bank of England Credit Conditions Survey (Q2 2025) reported a slight increase in credit availability for small businesses, with lenders expecting further improvement in Q3. This reflects growing competition between banks and non-bank lenders.
Business Health: Insolvencies and Risk
One important backdrop to SME finance is the health of UK businesses overall.
The Insolvency Service reported 2,048 registered company insolvencies in August 2025, which is 6% higher than the same month in 2024.
Insolvency levels remain significantly higher than before the pandemic, particularly in sectors such as construction, retail, and hospitality.
This elevated risk environment affects business loan approval rates and the cost of finance, as lenders factor in higher default probabilities.
Forecast for UK Business Loans in 2026
Looking ahead, the outlook for business lending in the UK is cautiously positive:
Lending Volumes: With GDP projected to grow by 1.9% in 2026 (OBR forecast), gross lending to SMEs is expected to increase modestly, supported by working capital needs and a gradual return of investment activity.
Business Loan Interest Rates: The Bank of England is expected to continue easing policy into 2026, which should lower the average cost of new SME loans from the current 6.5–7% band. However, risk spreads and funding costs will limit how far rates fall.
Approvals: With credit availability improving, approval rates should rise, especially for smaller firms with strong balance sheets and clear funding purposes.
Sector Outlook: Manufacturing, agriculture, and healthcare are likely to remain growth areas for lending, while consumer-facing industries may face continued pressure until insolvency levels stabilise.
Conclusion
The latest UK business loan statistics for 2025 show a market that is finally regaining momentum. Lending volumes are rising, approvals are up, and net borrowing is positive again after years of repayments. While business loan interest rates remain high, they are expected to gradually decline as Bank Rate falls.
For 2026, the official outlook suggests modest GDP growth, improved credit conditions, and further competition from challenger banks. This creates a cautiously optimistic picture for SMEs seeking finance, although insolvency levels remain a risk factor.
By tracking business loan statistics UK, including lending volumes, average loan sizes, and interest rates, SMEs can make more informed decisions about when and how to access finance.
FAQs
What is the average business loan size in the UK in 2025?
Official statistics do not publish a single average, but many SME loans are between £10,000–£25,000, depending on sector and turnover.
What are UK business loan interest rates in 2025?
As of March 2025, the Bank of England reported an average rate of 6.75% for new SME loans. Rates are expected to ease into 2026.
Are business loan approvals increasing?
Yes. Loan approvals in Q1 2025 were up 37% for term loans and 8% for overdrafts year-on-year, and lenders reported improving credit availability.
References (Primary)
UK Finance – Business Finance Review 2025 Q1. Gross lending, approvals, sector mix.
British Business Bank – Small Business Finance Markets 2025 (factsheet & report). 2024 totals; challenger banks’ share.
Bank of England – Money & Credit (July 2025), Effective Rates, MPC (Sept 2025). Rates, net flows, policy anchor.
BoE Credit Conditions Survey (Q2 2025). Availability trends.
OBR EFO (March 2025) & HM Treasury spring statement page. 2026 macro outlook.
ONS / Insolvency Service. Births/deaths (experimental quarterly), monthly insolvencies.