Raoul Ruparel, director for growth at Boston Consulting Group, described the decline as a structural problem for the UK economy rather than a sector-specific issue, and HSBC’s head of corporate and institutional banking, Michael Roberts, told a House of Lords committee that capital requirements are five times higher for direct SME lending than for funding the private credit groups that lend to the same businesses, a dynamic that helps explain why smaller, less standardised loans are less attractive to write.
Atom bank has responded to that gap by cutting the minimum size of its commercial mortgages twice this year, first to £200,000 and then to £100,000.
“It’s also revealing to see just how significant demand is for small loans currently,” said Tom Renwick, head of business lending at Atom bank. “For small loans to represent such a notable portion of commercial brokers’ enquiries is eye-opening, and given the shortage of lenders active in this space, there is a real danger that quality SMEs are having to postpone, if not abandon, pursuing opportunities.”
“As an industry, we need to ensure these businesses are properly catered for, and have access to the loans which can have a transformative impact on their future prospects, even if the sums involved are more modest.” Renwick added.
Brokers work harder to bridge the same gap
NACFB’s Intermediary Market Outlook 2025/26 found its members arranged £33 billion in SME lending in 2025, a 25% annual rise, with brokers considering an average of six lenders per deal and a quarter of clients having been declined elsewhere before being successfully funded.