SME lending is booming – so why are so many businesses still using credit cards? 

At a time when small business borrowing has surged by 63%, and access to finance couldn’t be greater, Ed Rimmer, CEO of independent SME lender Time Finance, shares his thoughts on why businesses need to become more strategic with their finances. 

Look at the headline numbers, and SME lending has rarely looked healthier. UK Finance’s latest Business Finance Review* shows lending to small and medium-sized businesses climbed 24% year on year to £5.3 billion in the second quarter of 2026, the fastest since recovery began in 2024. Meanwhile, another report** found that small business lending grew 63% in Q2, with the average loan size topping £300,000 for the second quarter running. By any measure, that’s a healthy amount of businesses borrowing. 

However, looking beneath the headline figures reveals a frustrating disconnect between the finance SMEs are requesting and the finance they actually need. We can see that SMEs are borrowing more and are seemingly more confident to borrow, but many are accessing the wrong type of finance. 

New data from SME Finance Monitor 2026*** highlights that approval rates for leasing finance applications stand at an extraordinarily high 82%, compared to a meagre 43% for traditional bank loans*. Despite this stark contrast, the average SME owner’s default instinct when seeking capital is still to walk into their high-street bank and ask for an overdraft or loan; they are thinking like consumers, not businesses.

The tendency to treat bank loans as a catch-all solution is understandable; banks are familiar, and traditionally the first port of call for a loan. It often feels like an easy shortcut to capital. But funding a long-term growth plan, purchasing new equipment, or managing seasonal cashflow hurdles without reaching for specialised Asset Based Lending is a real missed opportunity for businesses, both large and small. 

The power of matching product to purpose

The real strength in specialist SME finance isn’t just ‘more solutions’; it’s smarter matching of solutions to purpose, which is precisely what we aim to achieve for SMEs. Only through flexible and relationship-driven underwriting can businesses receive truly personalised financing designed for their unique needs. And that flexibility is something high street banks often struggle to accommodate. 

A business looking to acquire new machinery shouldn’t be eroding its cash reserves with a standard loan; it should be utilising Asset Finance to spread the cost over the lifetime of the revenue-generating asset itself. A rapidly growing business struggling with long-term payment terms from customers doesn’t need fixed-term debt; it needs Invoice Finance to release the tied-up value in its unpaid invoices immediately and on an ongoing basis. Meanwhile, Asset Based Lending (ABL) has become a critical multi-disciplined tool for many businesses. It allows them to access a variety of funds through multiple solutions by utilising existing assets such as machinery, property or invoices, freeing up working capital to invest in their future. 

When SMEs engage with funding that is built around their assets and designed to scale with their operations, it creates a stronger foundation for sustainable growth and more confident decision-making. 

Moving from borrowing to building 

As we navigate the second half of the year, and despite the many challenges faced by SMEs, the UK’s business spirit remains high. Businesses are ready to invest, hire and scale. But to turn the momentum into lasting economic growth, we need a shift in mindset.

Brokers, intermediaries and lenders alike must work with the business community to move away from their habit of borrowing like a consumer. The focus must shift from securing capital to securing the right kind of capital for businesses’ unique needs. By leaning into relationship-led, multi-product finance, SMEs can stop leaving their growth to chance and start fulfilling their true potential.    

Notes:

*Business Finance Review, UK Finance (2026).

**Purbeck Insurance Services (2026).

***SME Finance Monitor, UK Finance (2026).