Recent research conducted by UK business lender iwoca has highlighted a surge in the number of small and medium-sized enterprises (SMEs) choosing alternative lenders over conventional high street banks.
Gathered from iwoca’s SME Expert Index, the data shows that finance brokers are now more likely to submit loan applications to alternative finance providers, with 61% indicating that more than half of their loan submissions in the past month were to non-bank lenders.
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The shift in preference is largely attributed to the need for expedited decision-making processes, as reported by 73% of brokers.
This marks an increase from 63% in the previous quarter.
The SME Lending Thermometer, a measure introduced in early 2025 to gauge the demand for SME finance, has registered a score of 5.6 for the second quarter of 2025.
This score is a slight uptick from the previous quarter’s 5.23, suggesting an incremental rise in the demand for finance among SMEs.
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By GlobalDataThe thermometer’s score is calculated from broker feedback, which currently indicates that 41% of brokers perceive a high demand for finance, while only 26% view the demand as below average.
Furthermore, the research points to a growing perception among brokers that mainstream banks are retreating from the SME lending market, with 71% in agreement on this trend.
As a result, brokers are increasingly recommending alternative financing options to their clients, particularly for loan amounts greater than $100,000, with 65% of brokers guiding SMEs in this direction.
iwoca UK chief commercial officer Colin Goldstein said: ”We’re at a real turning point for SME finance. More than ever, small businesses need quick and flexible funding, and they’re increasingly turning to alternative lenders to get it.
“The pace of this shift shows just how much traditional banks are struggling to meet the changing needs of the UK’s small businesses.”
The findings of the SME Expert Index are based on a survey involving 83 brokers who submitted a collective total of 2,511 unsecured finance applications for their SME clients across the UK during December and January.
