Demand for SME finance set for the sharpest rise since 2022

Three-quarters of brokers expect demand for SME finance to rise over the next six months, according to the latest data from iwoca’s SME Expert Index. This represents the sharpest quarterly increase in this expectation since the index began tracking it in Q4 2022.

The survey found that almost two-thirds of brokers expected year-end inflation to land at 3% or lower — a sharp rise from 26% in Q1 2026.

UK SMEs are showing initial signs of renewed confidence, with recession fears easing to their lowest level in over a year and demand for finance set to rise at its sharpest pace since the launch of iwoca’s SME Expert Index.

Fewer than half (46%) of business finance specialists say their SME clients are concerned about a potential recession; this marks a fall from 54% in Q1 2026, when concern hit its highest level in over two years.

The share of brokers who say their clients are unconcerned has also grown, rising to 11% from 8% in Q1 2026.

Brokers are reporting not only improved sentiment among their existing clients, but also a broader expectation that this will translate into new borrowing activity.

Expansion, including moving to new premises, now accounts for almost a third (32%) of loan applications above £100,000, up from 19% in Q1 2026 and the highest share on record.

By contrast, the share of large loans used to manage cash flow has fallen sharply, from 42% to 18%, suggesting small businesses are shifting from survival mode to investing in growth.

Mark Di-Toro, director of strategic communications at iwoca, commented: “Small business optimism is showing early signs of recovery.

“Recession fears are easing and three-quarters of brokers expect SME demand for finance to rise.

“High inflation expectations have eased too, and the larger loans coming through are increasingly being used to fund expansion, rather than manage businesses' cash flow.

“With small firms being cautiously optimistic about their own prospects, our job, alongside brokers, is to make sure that finance is there quickly when they decide to move.”