📊 Understanding the Non-Regulated Business Loan Market in the UK – 2025 Update

Macro Headwinds & Financial Resilience

• The Bank of England’s July 2025 Financial Stability Report notes ongoing global economic uncertainty—geopolitical tensions and trade fragmentation—though the UK banking sector remains robust and capable of supporting businesses even in a downturn   .

• While corporate demand for credit has softened slightly, banks are still well-capitalised and non‑bank lenders (private credit, direct lenders, alternative finance) are expanding exposure via non-banking channels  .

SME Credit Gap & Shift to Alternative Lenders

• Major UK banks are retreating in SME lending, causing a £65–90 bn credit gap in working capital and growth finance—especially for asset-light or service-based companies  .

• In response, SMEs are turning to non‑regulated lenders: fintech platforms, direct private credit, broker-facilitated deals, and asset finance are gaining traction. Brokers via NACFB now facilitate £26.5 bn of this £38 bn broker-led market—mainly for property and leasing  .

• A noticeable momentum shift is occurring: quicker decisions, flexible structures, tailored terms—notably for working capital (51% majority), asset purchases, and accelerated expansions  .

Fintech Innovation & Private Credit Growth

• Fintech disruptors like Abound are offering AI‑powered credit platforms, underwriting underserved borrowers more efficiently. Abound saw a steep rise in profits (£300 k→£7.5 m), issuing £900 m in loans via data-driven models  .

• The global private credit market continues to expand beyond regulated banks—valued at $2–3 trillion globally—with UK firms increasingly accessing these channels ().

Regulatory Landscape: Light Touch with Oversight

• The FCA and PRA maintain vigilance, tightening leverage oversight around non-bank exposures (hedge funds, private credit)  .

• Meanwhile, consumer-focused reforms (e.g., BNPL regulation) and future oversight of non-mortgage lending (Phase 1 by Spring 2025) are poised to influence affordability and disclosures—but most business lending remains outside strict FCA/regulation zones  .

Outlook & Strategic Takeaways

Trend	Implications for Borrowers
Bank retreat	Opportunity to engage early with non-regulated lenders
Fintech/private credit growth	Access to faster, bespoke funding (especially via AI/data-driven models)
Regulatory shifts	Stay prepared: new disclosure norms and consumer credit rules may spill over to SMEs
Market resilience	Though macro uncertainty prevails, private lenders remain active and capital-rich

How Businesses Should Position Themselves

1. Expand funding sources — Don’t rely solely on banks; engage with fintech, private credit, peer-to-peer, and brokers.

2. Think beyond collateral — Alternative lenders are more receptive to cash flow–driven underwriting.

3. Be fintech-ready — Prepare clean, structured financial data for AI-backed platforms.

4. Monitor regulatory changes — New affordability and disclosures rules may evolve—stay informed.

5. Partner strategically — Align with brokers and specialized lenders who understand NBFI/private credit dynamics.

Why This Matters to You

Non‑regulated lenders are filling a £65–90 bn SME financing void  . For businesses needing working capital, asset finance, or growth capital, these providers offer speed, flexibility, and better alignment with modern SME structures than traditional banks.

Final Word

In 2025, meeting evolving market needs requires strategic adaptation. Use this blog as a thought leadership piece to illustrate how your consultancy or finance business can guide clients navigating the new normal of non‑regulated financing—fast, tailored, and privately enabled.