Four in five SMEs miss growth due to lack of finance

More than four in five UK small and medium-sized enterprises (SMEs) missed business opportunities in 2025 because they were unable to access funding, according to a new report from SME lender and broker Lovey.

Lovey’s 2026 H1 SME Finance Outlook found that 81% of SME owners said a lack of finance had prevented them from pursuing potential growth opportunities during the past year. The report also showed strong demand for funding, with 82% of businesses applying for external finance in 2025.

The research, conducted with market research agency Atomik Research, surveyed 504 SME owners across the retail, manufacturing, hospitality and construction sectors between December 2025 and January 2026.

Despite the challenges, the findings suggest business confidence remains relatively strong. Around 77% of SME owners said they feel confident about their business performance in 2026, while 71% expect to seek external finance in the coming year.

The report highlights rising costs and taxation as the biggest barriers to growth. A quarter of respondents (25%) cited the tax burden as the main obstacle to expansion, closely followed by rising operating costs (24%).

Smaller businesses were particularly affected by funding constraints. Among firms with annual revenues between £500,000 and £1m, 87% reported missing multiple opportunities because they could not access finance, compared with 82% of businesses generating between £250,000 and £500,000.

Demand for finance also varied by sector. Hospitality businesses were the most likely to seek funding in 2026, with 89% expecting to apply for finance, followed by manufacturing (71%), retail (66%) and construction (56%).

The research also found significant regional differences in access to funding. In the East Midlands, 96% of SMEs reported missing at least one opportunity due to a lack of finance, followed by Wales (94%) and London (91%).

The report also highlighted changing expectations among borrowers. More than a quarter of SMEs (27%) said digital loan applications were a priority, while 20% favoured flexible repayment options. Meanwhile, 83% of respondents said they were comfortable with AI-supported lending when combined with human oversight.

“SMEs remain the engine of the UK economy, but their ability to grow still depends heavily on how quickly they can access funding,” he said.

“After several challenging years, many business owners are starting 2026 with cautious confidence and clear ambitions to expand, whether that’s launching new products, opening additional locations or investing in their teams.”

He added that demand for finance remained strong, but that businesses often struggled to secure funding quickly enough to act on new opportunities.

“Improving access to fast, flexible finance will be critical if SMEs are to turn that optimism into real growth in the year ahead,” Smith said.

The report concludes that while many SMEs are optimistic about the year ahead, rising costs, late payments and ongoing cash flow pressures will continue to shape how businesses access and use finance.