When interest rates, costs and customer demand keep shifting, raising finance can feel harder than ever. Yet most SMEs still need external support at some point, whether that is to fund a growth plan, ease short-term cashflow or refinance older debt.
The economic backdrop is mixed. UK business investment fell by 0.3% in the third quarter of 2025, but remains 0.7% higher than a year earlier. That tells us firms are still investing, but they are being more selective about where and how they commit capital. At the same time, the Bank of England lowered the base rate to 3.75% in December 2025, following a period of rapid tightening and then gradual cuts.
Against this backdrop, planning and raising finance is less about finding a single “perfect” product and more about building a robust, flexible funding plan. In this article we look at cashflow forecasting, funding options, lender expectations, government-backed schemes and practical steps you can take now to strengthen your financial resilience and make raising finance more successful.
Start with realistic cashflow forecasting
Before we talk about lenders, we need to talk about numbers. Any conversation about raising finance starts with a clear, realistic view of your cash position.
Focus on building rolling 12–18 month forecasts that show:
- Sales assumptions: Base, upside and downside cases, with seasonality.
- Costs and inflation: Payroll, rent, energy and input costs, plus likely increases.
- Existing finance: Capital and interest payments, covenant tests and expiry dates.
- Working capital: Debtor days, creditor terms and stock levels.
Your cashflow forecast should show when gaps appear and how large they might be. That drives the size, timing and structure of any raising finance plan. Lenders will ask to see how you arrived at your figures, so keep workings and assumptions clear, ideally supported by your accounting software.
If you are unsure where to start, we can help build or review forecasts and scenario models so you can talk to lenders with confidence and avoid asking for too little, or too late. You can find out more about how we support SMEs on our website.
How to approach raising finance when conditions keep shifting
Once you understand your cash needs, you can shape a strategy for raising finance rather than jumping at the first offer. We usually encourage clients to think in three layers:
- Core debt: Term loans or asset finance that match long-term assets.
- Working capital: Overdrafts, invoice finance or revolving facilities.
- Short-term support: Seasonal lines, VAT funding or temporary extensions.
When you are raising finance, aim to:
- Match term to purpose: Use longer terms for equipment or fit-out, shorter terms for working capital.
- Avoid over-concentration: Do not rely on a single lender for every facility if you can sensibly diversify.
- Stress-test affordability: Check repayments still work if interest rates move again or revenues dip.
The Autumn Budget 2025 confirmed the government’s commitment to incentives such as full expensing and a new 40% first year allowance for some assets, which improve after-tax returns on investment. These measures will not replace borrowing, but they do strengthen the case for well-planned projects when you are raising finance for capital expenditure.
What lenders expect to see in 2025/26
Lenders are under pressure from regulators and their own credit teams, so they expect better quality information than they did a few years ago. The good news is that SMEs with clear, up-to-date data still have options.
Most mainstream lenders – and many alternative providers – will want to see:
- Clean statutory accounts: Filed on time at Companies House and consistent with your management information.
- Recent management accounts: Ideally quarterly or monthly, reconciled to your bank and VAT returns.
- Credible forecasts: At least 12 months, with sensitivity analysis.
- Tax position: No large unknown liabilities or long-overdue returns with HMRC.
- Directors’ conduct: Up-to-date filings, no unexplained CCJs and evidence of good governance.
From a relationship perspective, lenders value early, honest communication. If you know you will be raising finance in six to twelve months, start the conversation now. Share your plan, the impact of recent trading conditions and how you are responding.
If you want support preparing this pack, we can work with you to pull together accounts, forecasts and KPI dashboards that lenders can assess quickly, reducing friction when you are raising finance.
Government-backed schemes and other support
Beyond traditional bank lending, government-backed schemes and specialist funds remain important options for SMEs raising finance.
The British Business Bank’s Growth Guarantee Scheme runs until 31 March 2026 and is designed to improve access to term loans, overdrafts, asset finance and invoice finance for smaller businesses. By providing a guarantee to accredited lenders, it can help viable firms secure facilities that might otherwise be declined.
The government has also confirmed that the British Business Bank’s total financial capacity will increase to £25.6 billion, with a plan to support at least 85,000 loans over the next five years. This, alongside ongoing work to improve regional and sector-focused funds, should create more routes for raising finance across the country.
When considering these schemes:
- Check eligibility: Sector, turnover, purpose of borrowing and state aid limits.
- Compare pricing: Government support reduces lender risk, but rates and fees can still vary.
- Understand security: Personal guarantees and charges over assets may still be required.
We can help assess whether government-backed options fit your plans and how they sit alongside existing facilities.
Choosing between debt, equity and short-term support
Not every raising finance question ends with a term loan. The right mix of debt, equity and short-term support depends on your goals, risk appetite and time horizon.
Some broad principles we use when advising SMEs:
- Debt finance: Suits businesses with stable or growing cashflows that can comfortably service repayments. Debt preserves ownership but increases fixed commitments.
- Equity investment: Can support larger or higher-risk growth plans, especially where cashflow will be uneven. It dilutes ownership but can bring expertise and networks.
- Short-term facilities: Helpful for bridging timing gaps – for example around VAT, grants or large customer payments – but should not become a permanent fix.
Data from recent small business equity reports shows that 2024 remained a challenging year for equity deals, particularly at earlier stages. That makes preparation even more important. If you are raising finance from investors, you will need a clear growth story, evidence of traction and realistic valuations.
For many SMEs, a blended approach works best: a core term loan, a modest overdraft and, where appropriate, smaller equity stakes from founders, family or aligned investors. The mix should give you headroom without putting the business under constant repayment pressure.
Bringing your finance plans together
Planning and raising finance in an unpredictable economy is about control, not guesswork. You cannot set interest rates or change market demand, but you can put your business in a stronger position by understanding your cashflow, preparing high-quality information and choosing the right mix of funding options.
Right now, business investment is slightly higher than a year ago even though quarterly figures dipped, while the base rate has been held at 4% as the Bank of England balances inflation and growth. These signals suggest that lenders and policymakers still expect viable businesses to invest, but they want to see disciplined plans.
Our advice is to start early, be realistic about risks and give yourself options. Map out your cash needs, decide where debt makes sense, explore government-backed schemes and only use short-term facilities where they genuinely bridge timing gaps. When you are raising finance, a well-prepared proposal can be the difference between a fast yes, a slow maybe and a no.
If you would like tailored support with raising finance – from cashflow forecasting and management accounts through to lender meetings – our team is here to help. You can learn more about how we work with SMEs and contact us through our homepage.