SME funding offers up 22% YOY as small businesses gear up for growth: which sectors and locations are thriving?

Access to finance is a critical driver of small business growth, investment and resilience. According to the British Business Bank, SME bank lending rose 9% to £68bn in 2025, its second highest level in 13 years, and around half of smaller businesses now seek external finance. By analysing its own customer lending data, Capitalise shows where UK SMEs are seeking funding, which sectors are driving demand, and how businesses can overcome rejections to achieve their ambitions in an evolving economic landscape.

Customer data shows that SME applications for finance rose 16.5% and offers rose 22% between January and September 2026, compared with the same period last year. This shows that small businesses are ready to invest and that more of them are succeeding in securing funding.

North East lending offers rise 71% year-on-year, while the East of England and West Midlands lead on applications 

The UK’s business continues to evolve, with varying funding needs across sectors and regions. UK GDP growth is projected at 1.1%, which may be helping fuel business investment. While some industries are driving demand for finance, certain parts of the country are demonstrating a stronger appetite for investment, highlighting regional differences in business growth, cash constraints or seasonality trends. 

The East of England shows strong demand from businesses seeking funding, with applications up 24% and offers up 45%, among the strongest growth of any region. The region has had a particularly strong year, especially in mid-market businesses generating between £10 million and £500 million, which grew 5.4% year-on-year, surpassing the national average of 4.4%. 

The West Midlands recorded the highest number of applications of any region and had the fastest growth, up 28%, led by businesses in the Birmingham area. Offer growth lagged slightly behind at 26%, suggesting a growing share of applications are being turned down and could suggest more fragile businesses within the area. 

The North East is the most improved region, closing the gap on the rest of the UK, with offers rising 71% and being the only region where the rejection rate actually fell over the past year, with areas such as Newcastle leading the way for lending. While the North East has the fewest private sector businesses of the English regions, the data suggests the businesses that are there are actively pushing to grow. The North East’s rise comes amid growing investment in the region. Private equity and venture capital investment in North East businesses reached £180 million in 2025, a rise from 2024. The North East Investment Zone is providing £160 million to support private sector investment, and the region’s new AI Growth Zone is expected to attract up to £30 billion of private investment and create more than 5,000 jobs. 

London leads for the number of lending applications submitted, which is understandable due to the size and breadth of the capital. London has around 1,042 million private sector businesses, and the South East of England has 877,000, together accounting for 34% of the UK business population. 

Wholesale and professional services firms see the biggest increase in finance offers

Wholesale and professional services businesses led demand for finance across the data analysed. Applications rose by more than 30% in both sectors, and offers grew in line: up 35% for wholesale firms and 31% for professional services. Together they accounted for around four in ten offers made in 2026.

The rise appears to reflect more businesses seeking finance, as rejections in both sectors also rose. With business and professional services firms expecting subdued conditions through to mid-2026, many may be turning to finance to manage cash flow as well as to invest. IT services continue to benefit from strong demand for AI, while restructuring and tax work remain resilient. In contrast, mergers and acquisitions and property related activity continue to be constrained by uncertainty, according to the Bank of England.

Professional services firms appear better placed than most; almost one in four of their completed applications secured an offer, the best success rate among the larger sectors, which may reflect the steady client income lenders look for.  

Rejection rates are still high across the business landscape

Businesses that fail to monitor their credit profile may be caught off guard when their applications for loans, lines of credit or supplier trade credit are rejected. Research suggests that almost two-thirds of business owners have never checked their business credit score, while nearly 90% admit they do not understand the factors that influence it.

Although there has been a healthy increase in applications and offer growth for UK SMEs, there are many reasons why a business may be declined finance by lenders, reflecting factors such as creditworthiness, affordability, trading performance and the overall level of risk associated with the business. Across all applications, the rejection rate has increased from 16.5% in 2025 to 19.5% this year, yet with an increase in applications, a 3 percentage point increase that is perhaps unsurprising given the rise in applications. The South West saw the sharpest rise in rejection rate, from 14.6% to 21.1%. In the East Midlands, offers fell 21%, while rejections rose 61%, with Nottingham a key city influencing this. The rise in rejections in the South West and East Midlands was driven largely by professional services firms in cities, bucking a national trend where the sector saw offers rise.

Hospitality tells the most contrasting story of any sector; applications rose 29% and offers 27%, but rejections rose 68%, the fastest of any main sector. The share of hospitality applications rejected on the same day jumped from 48% to 66%, the biggest rise of any sector. A same-day rejection usually means the business failed a lender’s basic checks. As the hospitality industry has faced some of the biggest hurdles in the current economy, lenders may see this as a risk. The sector has the second-highest number of company insolvencies of any industry. Construction applications rose 17%, while rejections rose 41%, with lenders possibly remaining cautious around this volatile sector.

One in three businesses go on to receive funding offers after previous rejections

Nearly half (44.5%) of completed applications were rejected outright, data reveals, yet one in five received an offer. But a rejection from one lender doesn’t mean a business can’t get finance from another. 

Between January 2024 and June 2026, more than one in four funding searches (26.5%) were declined by at least one lender. Of those, more than one in three (35.7%) still went on to receive an offer from another lender, reassuring businesses that rejections don’t necessarily mean the end of your business growth plans. Lenders may specialise in different sectors, certain loan amounts may apply, and they may have specific lending criteria, so while a business may be turned down by one lender, they may be favoured by another. 

Because applications are shared with several lenders at once, a decline from one rarely holds a business back. In 87% of cases where a business was declined by one lender but received an offer from another, the offer arrived on the same day or before the decline.

The average SME asks for close to £49,000 to grow their business

The Office for National Statistics UK Business Bulletin revealed there were 2.79 million VAT- and/or PAYE-based businesses in the UK as of March 2026, an increase of 1.9% YOY.  Despite a turbulent few years of rising costs and economic uncertainty, the number of businesses continues to grow across the UK. 

Looking at completed applications made available to lenders, businesses across the country have also continued to seek financing to fund expansion, support business growth, and strengthen their capital base. The average loan size requested is around £48,800 across all sectors. 

Top sector average loan amount requested

The property sector requested the highest average loan amounts, at around £56,100, reflecting the substantial investment often required for renovation and development. Property businesses were also the least likely to be rejected (34.7%), possibly because property often gives lenders an asset to secure the loan against. Manufacturers requested the second-highest amounts, averaging around £52,600, but were also the most likely to be rejected, with nearly half of their applications turned down, which may reflect how manufacturers are seen as a lending risk given tighter margins, higher running costs and supply chain pressures in the sector. In contrast, hospitality businesses requested the lowest average amounts, at around £40,500, potentially reflecting a need for smaller amounts of funding to support growth, cover operating costs or increase working capital. Nick Richardson, Head of Funding at Capitalise, said:

"It's positive to see so many businesses across the UK looking to invest in their future, from the North East, with its sharp 71% increase in offers, to wholesale and professional services firms, where more businesses are securing finance. Although rejections have risen too, a decline from one lender isn’t the end of the road. More than one in three businesses turned down by a lender still went on to receive an offer from another.

If you’re worried about being rejected, there are practical steps you can take. Check your business credit score so you know where you stand and what to improve, keep your financial records up to date, and have a clear plan for how the funding will be used. Speaking to a finance specialist before you apply can also help.”

It's clear that businesses want to invest in their future, with the increase in applications and rising offers. The UK SME lending market is still growing and appears resilient, but businesses are prioritising strategic investment depending on location and their sector. Capitalise can support businesses in understanding their credit score and gaining access to the appropriate funding available. 

Methodology 

The analysis uses anonymised data from UK small business finance applications made through Capitalise. It compares January to September 2025 with January to September 2026. Regions are based on business postcodes, and cities refer to postcode areas.

Year-on-year figures cover all applications. Rejection rates, offer rates and average amounts requested for 2026 cover only completed applications released to lenders. Figures on lender declines and subsequent offers cover funding searches from January 2024 to June 2026 by businesses with a valid UK postcode. Amounts are the sums businesses requested, not amounts lent, and are estimated from £20,000 bands.