Small businesses are borrowing more money, with one insurance firm reporting a sharp growth in applications.
Purbeck Insurance Services, a UK SME personal guarantee insurance firm, saw a 63% rise in small business borrowing for personal guarantee-backed finance in Q2, 2026. Company data shows the average loan value exceeded £300,000 for the second consecutive quarter.
Working capital loans for daily business operations were most popular and the biggest driver behind securing personal guarantee-backed borrowing, accounting for 36.2% of all Q2 2026 applications.
For working capital loan applications, growth focused borrowing accounted for 20% and asset purchase, development and acquisition amounted to nearly one in four, showing that increased borrowing was also intended for longer-term investment.
Increased borrowing among UK SMEs was happening at the start of this year too. According to UK Finance’s Business Finance Review, SME lending grew by 16% year-on-year and reached £5.3 billion in Q1 2026.
A growing borrowing environment follows evident cashflow pressures facing SMEs. Research from 2025 by cashflow finance specialists, Novuna Business Cashflow, found that 82% of SMEs faced cash flow issues and cited late customer payments (36%) and seasonal sales shifts (35%) as main factors. They also cited general economic uncertainty, with 27% mentioning unexpected changes in trading conditions.
“I’m not surprised to see more SMEs borrowing this year” – Tim Harrison, founder of Unity Property Investment.
“I’m not surprised to see more SMEs borrowing this year. For us, borrowing isn’t about plugging gaps in the business, it’s about using capital efficiently. If finance allows you to invest in assets that generate strong long-term returns while preserving cash for future opportunities, it can be a very powerful tool.
“If it’s structured properly and backed by strong cash flow, borrowing can help businesses grow while remaining resilient if market conditions change.”
“At Unity, we look at debt from two angles. Firstly, for our own business, where we use borrowing to acquire and grow our property portfolio. Secondly, when working with investors, where we encourage them to think carefully about how finance fits into their wider investment strategy, rather than just focusing on getting the biggest loan possible.
“We also believe different types of borrowing have different jobs. Long-term debt is ideal for assets we’re planning to hold for many years, while our revolving credit facility gives us the flexibility to move quickly when the right opportunities come along without having to tie up large amounts of cash.
“The important thing is being disciplined. Every investment we make is stress-tested before we commit. We ask ourselves: if interest rates went up again tomorrow, would the rental income still comfortably cover the borrowing? If the answer is no, we simply don’t do the deal.
“I think that’s probably why we’re seeing more businesses borrow today. The conversation has shifted away from borrowing for the sake of growth towards using debt as a strategic tool. If it’s structured properly and backed by strong cash flow, borrowing can help businesses grow while remaining resilient if market conditions change.”
