Lending to small and medium-sized enterprises (SMEs) has reached its highest level since the pandemic.

According to UK Finance, gross lending to SMEs reached £5.35bn in the second quarter of this year.

That’s 26% higher than in the same period in 2025.

And this isn’t an isolated increase.

SME lending has grown consistently for the past two and a half years, suggesting businesses are continuing to seek finance despite a challenging economic backdrop.

Iran war remains a concern

Nevertheless, many SME owners are concerned about the potential impact of the Middle East conflict.

Month-by-month figures suggest that new lending peaked around the turn of the quarter, but slowed as the Iran war began to hit business confidence.

But notably, there was a slight increase in loan and overdraft applications following ceasefire talks in June.

UK Finance said this highlights “the impact geopolitical tensions have on confidence”.

So while demand for finance was resilient across the first half of 2026, it seems businesses are becoming more cautious, especially now that inflation is heading upwards.

“The continued growth in SME financing since the pandemic is evidence of the sector’s resilience,” said David Raw of UK Finance.

But he pointed out that SME confidence has “inevitably” taken a hit because of the Middle East crisis.

“A more cautious business outlook across the sector reflects the uncertainty businesses face going forward and the impact this has on SME lending,” Mr Raw added.

What this means for your business

For business owners, the key is understanding what your business needs now and what it could need if trading conditions become more difficult.

Whether you’re planning an investment or simply want a stronger cash-flow buffer, knowing what finance is available can help you make decisions with greater confidence.