SMEs boost working capital borrowing ahead of Budget

Small and medium-sized businesses (SMEs) are borrowing record sums to sustain cashflow as pressure mounts ahead of the Autumn Budget, new figures suggest.

Data from Purbeck Insurance Services, provider of personal guarantee insurance (PGI), shows the average loan secured by SMEs in Q3 2025 has risen to £289,827, up from £204,035 a year earlier – a 42% increase.

For young businesses trading for two years or less, average loan values hit a record £155,257, representing a 64% year-on-year jump.

The main driver of borrowing continues to be working capital requirements. More than a third (36%) of SME loans in Q3 were taken out to sustain cashflow, a proportion not seen since the same quarter in 2024.

At the same time, demand for PGI has also reached new highs. Applications in September 2025 hit record levels, with overall demand in Q3 up 16% compared with the previous quarter. The insurance offers protection for company directors who are required to put up personal assets as security against loans.

However, while borrowing is climbing, the value of insurance cover taken out is falling. The average level of PGI protection dropped to £168,913, down from £194,786 in Q2 and now at its lowest point since early 2024.

“The sharp rise in loan values, particularly among younger businesses, highlights the vital role that funding plays in keeping firms resilient and able to grow in the face of rising costs and continued uncertainty,” Davison said. “However, it is concerning to see that while borrowing is rising, the level of personal guarantee insurance protection taken is falling. At a time when personal liabilities are potentially greater than ever, PGI is a crucial safety net for business owners and their families.”

The findings coincide with Business Finance Week, launched this week by the British Business Bank, which aims to support SMEs in navigating finance options at a time of rising demand and economic uncertainty.