A new report from Purbeck shows a clear shift in the way SMEs are borrowing. More than a third of loans agreed in October were used simply to support day-to-day cash flow – the highest proportion recorded since early 2025.
Confidence remains shaky across the sector. Barclays’ most recent index indicates that over half of small and medium-sized businesses have put spending plans on hold due to ongoing uncertainty.
At the same time, insolvency figures continue to rise, with more than 2,000 companies entering liquidation in October 2025 alone.
Together, these indicators paint a picture of businesses under strain, with many owners moving their focus from expansion to stability.
Borrowing levels continue to climb
The amount SMEs are borrowing has grown sharply. Third-quarter data shows average loan values up by more than 40 per cent year on year, now edging close to £300,000.
Newer businesses appear even more stretched, with average borrowing rising by more than 60 per cent.
Purbeck’s report also highlights an increase in the use of personal guarantee-backed finance, leaving business owners more exposed at a time when confidence is particularly fragile.
Why working capital loans are in demand
Working capital loans offer a practical buffer when firms encounter late customer payments, seasonal downturns or temporary disruptions.
By providing quick access to cash, they help businesses cover payroll, supplier invoices and day-to-day operating costs without derailing normal activity.
These facilities tend to be most effective when they form part of a planned, strategic approach rather than being used as a last-minute rescue tool.
Careful assessment of repayment terms, cashflow forecasts and alternative funding options is essential before committing.
The surge in demand for working capital finance clearly mirrors the challenging environment facing UK SMEs.
Even so, when used wisely, these loans can give businesses breathing room to stabilise operations and prepare for future opportunities.
