FinCova Digest: This Week in UK Business Finance
Week of 22 June 2026
The stories shaping the funding landscape for UK businesses right now – from record SME lending figures to landmark new payment legislation.
SME lending hits its highest level since 2021
UK small business lending had a strong start to 2026. According to UK Finance’s latest Business Finance Review, gross lending to SMEs rose 16% year-on-year to £5.3 billion in Q1, the highest quarterly figure since 2021. New loan approvals jumped 36% in value and 42% in volume compared to the same period last year, with growth particularly strong among the smallest businesses.
For businesses that have been sitting on the fence about finance, the data suggests the market is moving in their favour. Lenders are approving more applications, at higher values, across a broader range of sectors.
UK SME profits reach a four-year high
UK small business profits grew by 7.4% in the year to Q1 2026, according to Sage’s SME Performance Pulse – the strongest growth rate since 2022. Revenues rose 3.2% for a fourth consecutive quarter, with the East and West Midlands leading regionally.
The data, drawn from anonymised accounting records across nearly 150,000 businesses, points to genuine momentum in the SME sector. Confidence is building, and the businesses that act on it tend to be the ones that pull ahead.
More businesses are using finance to manage tax and refinance debt
New analysis of Funding Circle’s 2025 lending data shows a shift in how UK SMEs are using finance. Borrowing to cover tax payments rose 29% year-on-year, while debt refinancing saw the sharpest increase of any category, up 33% to £88 million. Working capital lending accounted for 37% of all loans, up 17%.
The figures reflect a lending market shaped increasingly by operational need. Businesses are using finance as a practical cashflow tool – to meet obligations, manage timing gaps and create breathing room, not just to fund growth.
Government introduces its toughest action on late payments in a generation
The Commercial Payments Bill entered Parliament in May 2026, introducing the most significant reforms to business payment practices in over 25 years. Key measures include a 60-day cap on payment terms for large firms paying smaller suppliers, mandatory interest on late payments set at 8% above the Bank of England base rate, and a ban on the withholding of retentions in the construction sector.
The Small Business Commissioner will also gain new enforcement powers, including the ability to investigate persistent poor payment practices and issue financial penalties. Late payments currently close 38 businesses every single day in the UK. The legislation is a meaningful step toward changing that.
Strong profits, but late payments are still trapping cash
Improved profit figures tell one story – cashflow tells another. Sage’s SME Performance Pulse found that 49% of all SME invoices are currently overdue, with businesses waiting an average of 27 days after issuing an invoice to receive payment. As a knock-on effect, businesses are taking an average of 37.1 days to pay their own suppliers, up from 31.9 days the previous year.
Strong revenue does not always mean available cash. The gap between what a business has earned and what it has actually received remains one of the most common pressures facing UK SMEs, and one of the least talked about.
Staying informed is the first step. If any of this week’s stories have prompted questions about your own funding position, FinCova can help. We’re a UK business finance marketplace connecting SMEs and larger businesses with a trusted panel of specialist lenders – with no obligation to proceed. Contact us to find out more: