It’s become something of a familiar conversation over the past couple of years. SMEs and property investors still want to grow, still see opportunity, but feel less confident than ever that traditional lenders will support them in doing so.
The appetite to borrow certainly hasn’t disappeared. According to the recent IPSOS SME Finance Monitor, 38% of SMEs say they are happy to borrow to grow. That figure has held steady since last year and is meaningfully higher than the levels seen in 2022 and 2023.
Dig a little deeper and it’s clear that ambition is strongest among businesses that are actively scaling, with willingness to borrow rising to over 50% for SMEs with between 10 and 49 employees.
Yet running alongside that demand is a persistent lack of confidence in access. The same research shows that 38% of SMEs believe it would be difficult for a business like theirs to secure finance at all, with that concern even more pronounced among smaller and younger firms.
Almost one in five SMEs say they are happy to borrow to grow but expect to struggle to do so. That disconnect is telling, and it speaks volumes about where the market still isn’t working as smoothly as it should.
RISK ASSESSMENT
From where I sit, this is less about a lack of capital in the system and more about the way risk is being assessed. High street lenders remain cautious, particularly when faced with anything that falls outside standardised criteria.
Smaller businesses, start-ups and property-backed SMEs often don’t fit neatly into those boxes, even when the underlying proposition is sound.
The outcome of that caution shows up clearly in approval rates. IPSOS says that, over the past 18 months, fewer than half of SME finance applications have been successful.
For the smallest businesses, success rates have fallen sharply compared with pre-pandemic levels. By contrast, larger SMEs continue to see relatively stable outcomes, reinforcing the sense that scale brings comfort for mainstream lenders.
This is where specialist finance has increasingly found its footing. Historically, specialist lenders were best known for short-term solutions, particularly bridging finance used to navigate time pressure or transitional situations. That remains an important part of the toolkit, but it is no longer the whole story.
ROOM TO BREATHE
What we are seeing now is a growing demand for facilities that provide more breathing space. Property investors and SME owners are looking for funding that allows them to stabilise, execute a business plan or improve an asset, without the pressure of an imminent exit.
In response, many specialist lenders are extending their focus beyond pure bridging into term and medium-term facilities that sit between short-term finance and long-term bank lending.
These types of loans tend to be measured in years rather than months, often structured over three to five years, and underwritten with the same pragmatic, asset-led approach that has long characterised the specialist sector.
For borrowers, that combination of certainty and flexibility can be transformative. It allows them to focus on running and growing their business, rather than constantly worrying about the next refinance.
There is also an important confidence element at play. Only 45% of SMEs now say they would feel confident about a hypothetical finance application being successful, down significantly from a decade ago.
That erosion of confidence matters. When businesses stop believing finance is accessible, they delay investment decisions, shelve plans and ultimately grow more slowly.
Specialist lenders cannot, and should not, replace the high street. But they do have a crucial role to play in supporting viable businesses that sit just outside traditional lending models.
By taking a more rounded view of risk, considering assets, experience and strategy alongside the numbers, specialist lenders can help close the gap between ambition and execution.
THE CLIENT JOURNEY
For brokers, this evolution is particularly important. Clients’ needs are rarely static, and funding should reflect that. A short-term facility may still be the right starting point, but increasingly it forms part of a broader funding journey rather than a one-off solution. Having access to lenders that can support that journey over the medium term is becoming essential.
High street caution is unlikely to ease quickly. Regulatory pressure and economic uncertainty will continue to influence decision-making.
In that context, the growing role of specialist lenders in providing longer-term, flexible solutions feels less like a trend and more like a necessity.
Specialist finance has always thrived by adapting to gaps in the market. Right now, those gaps are widening, and the sector is responding accordingly.
