Paragon Development Finance has launched a light industrial loan product aimed at experienced developers building units of 5,000 sq ft or less, as demand for smaller industrial space continues to outpace supply.
The new facility offers funding of up to £10 million over terms of up to 24 months and is intended to support SME developers working on schemes designed for smaller occupiers.
The lender said the product had been introduced against a backdrop of continued demand for modern, flexible industrial space, particularly from SMEs, trades firms, e-commerce retailers and hybrid businesses looking for well-located accommodation.
Paragon pointed to occupational demand of 37.4 million sq ft in 2025, which it said was the highest level since 2022 and 12% above the pre-pandemic five-year average.
It also cited Office for National Statistics data published in January, showing that more than 71,000 new businesses were launched between October and December 2025, up 10% year-on-year. Paragon said that rise in business creation underlined the need for accessible industrial space as smaller firms start up and expand.
Neal Moy, managing director of development finance at Paragon Bank, said: “Our new Light Industrial product reinforces our commitment to supporting ambitious SME developers and responding to structural shifts reshaping the UK’s industrial landscape.
“Across the country, there is an undersupply for small, flexible and well-located industrial units, with SMEs increasingly looking to grow, improve their logistics capability or bring production closer to home. By providing specialist finance of up to £10 million over 24 months, we are enabling developers to deliver the high-quality units that modern businesses need to operate, grow and scale.”
He added: “This new product builds on a series of strategic moves we’ve made in the last year, including a growing footprint in later living, care, PBSA and Build to Rent segments, as well as raising our loan limit from £35 million to £60 million. Light Industrial finance is the next step in ensuring our developer partners have the support, clarity and long-term relationship focus they expect from Paragon.”
The launch broadens Paragon Development Finance’s specialist lending proposition across commercial and residential markets. The business said it increased its new business pipeline by 31% in its last financial year, while delivering more than £527 million of new lending and loan book growth of 8.6%.
For developers and investors active in the industrial sector, the move reflects the growing focus among lenders on smaller-unit schemes, where occupier demand has remained resilient and supply has been limited in many local markets.
