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The lender market for owner-managed businesses changed while you were running the business. 68% of SME lending in 2025 came from outside the big five, challenger and specialist banks took 60% of gross SME bank lending, and 28 new providers have entered the market since 2013 (British Business Bank, March 2026).
Lenders that built their books on VC-backed software now underwrite profitable operating businesses, because the logic is the same: cash flow that covers interest and repayment. The businesses that fit best, the bootstrapped operators with real revenue, are the least likely to be approached.
Here is what changed, why growth debt now applies to you, and what to do about it.
The market no longer belongs to the big five
The numbers tell the story. Gross SME bank lending rose 9% to £68bn in 2025, the second highest level in 13 years. Challenger and specialist banks took 60% of that lending, up from 39% in 2012. Add the non-bank lenders and 68% of all SME lending in 2025 came from outside the big five. 28 new providers have entered the smaller business lending market since 2013, and 43% of them are British Business Bank delivery partners.
Credit conditions eased gradually through the year. More lenders competing for the same good businesses means wider choice, keener terms and a stronger negotiating position for the borrower. That is the shift in one sentence.
The Bank's own survey shows how slowly the other side of the market has moved. Around half of smaller businesses used external finance in 2025, and the most used products were credit cards, overdrafts and leasing. Debt is still seen as a way to stay stable, not a way to grow.
There is a gap between the lending market as it is and the lending market as most owners still picture it. That gap is the opportunity.
Why lenders changed: the logic was always cash flow
Growth debt grew up around VC-backed software companies. Lenders wanted one thing: cash flow predictable enough to cover interest and repayment. Recurring subscription revenue was easy for a credit committee to see, so venture and growth debt became a funding route for that world.
The loan logic never needed software. A profitable operating business with EBITDA of £500k to £5m runs on the same arithmetic. Site takings, contracts, repeat customers: the cash flow is there, and often easier to touch than a subscription curve.
What has changed is not the product. Venture debt, the best-known form, is a specialised subset of private credit, and growth debt sits in the same family. What has changed is who the lenders will underwrite. A gym chain with 12 sites, a clinic group, a café chain: each has monthly cash flow that services debt, which is exactly what a lender's credit committee wants to see.
This is our read of the market, and we would not build an article on it if the evidence pointed the other way. The Bank's survey found debt is still used mostly for stability rather than growth. The supply side has moved. Awareness has not, and the businesses that fit best are the least likely to ask.
Why this applies to you
You built the business without investors. At some point you picked up the idea that corporate finance is for quoted companies, that growth capital means selling a share, or that lenders only back software with recurring revenue.
None of that is where the market is now.
Think about what you already hold: a profitable business, several years of trading, revenue that lands every month, and a next move you can point to. A new site. More capacity. A smaller competitor to buy. That profile is exactly what the new lenders underwrite.
Why the right lenders haven't called you
Lenders fish where they know the water. They spent a decade courting venture-backed software, and owners of profitable operating businesses spent the same decade assuming growth debt was not for them. Neither side moved, until now.
Awareness is rising but still partial: 62% of smaller businesses now know where to find information on finance types, up 5 points in a year (British Business Bank, March 2026). That leaves more than a third in the dark, and the best-fit businesses are usually the busiest, so they are the last to look.
How growth debt works
Growth debt is private credit lent against the strength of your cash flow. You draw the capital, the business repays it from operating profit over an agreed term, and you keep the equity and the control. No share sale. No board seat. The upside stays with you.
The structure is set to fit the business: repayment profile, covenants, security, and room to flex around when the cash arrives. Lenders price what the business can service, and the cleaner your numbers, the better the terms.
The scale comes down to two measures. Financing of this kind is typically between £2m and £25m, and a term sheet typically lands in 6 to 8 weeks. The money follows a move you can already describe, not a hope you cannot.
What the money is for
New sites. More capacity. Hiring ahead of demand. Acquiring a competitor that fits. The financing is the means; the move is the point. That is the order the best lenders look at it in, and the best owners present it in.
Not sure which route fits?
The free guide compares both on your own numbers, question by question.
Compare growth debt and equity on your own numbers → Growth debt or equity: 10 questions | Fuse Capital
What growth lenders look for
- Provable, repeatable revenue. Months and years of the same customers coming back, not a hockey-stick forecast.
- Profit. EBITDA of roughly £500k to £5m is the band this market underwrites most willingly.
- Cash flow that covers interest and repayment. The whole mechanism, in one line.
- A clear use of funds. Lenders back a move you can explain: this site, this capacity, this acquisition, and what it returns.
- Several years of trading. Five or more is ideal; it proves the revenue engine.
- Control staying with you. The lender wants the people who built the business to keep running it.
Notice what is not on the list: a funding round. A business that never raised has a clean record: no cap table to unpick, no investor letters to satisfy, no valuation to re-litigate.
You already hold everything on this list. What most owners lack is the process that turns it into a term sheet: the data room, the shortlist of lenders who genuinely underwrite this profile, and the negotiation.
Growth debt or equity: how they compare
Both routes to capital are legitimate. They answer different questions, and one will fit a given move better than the other. Neither is inherently superior.
| Growth debt | Equity | |
|---|---|---|
| What you give up | Monthly repayments from cash flow | A share of the business and a seat at the table |
| What you keep | Ownership and control | Patient capital, no repayment pressure |
| Cost | Interest and fees on what you draw | A share of future value, in perpetuity |
| Suits | A proven move with cash flow that covers the cost | A bigger jump with an uncertain outcome |
| Who decides | The lender's credit committee | The investor's partners |
Equity earns its place when the outcome is genuinely uncertain: a new market, a long product build, a turnaround. When the move is proven and the cash flow covers the cost, equity gives away more than the move needs. The share does not come back.
The equity market is also thinner for this kind of business right now. UK equity investment fell to 2019 levels in 2025, and AI companies took roughly two-fifths of everything raised (British Business Bank, March 2026). For a profitable, bootstrapped operator, the debt route is the one with the least competition for the money.
A working guide for your own numbers
The table above is the short version. The full comparison lives in our free guide, "Growth debt or equity: 10 questions to answer before you pick". It walks each route through 10 questions, with the debt answer, the equity answer and what to look at in your own figures, and finishes with a worked example. Allow 20 minutes with your latest management accounts to hand.
What to do about it
The market has changed. Now someone has to work it: prepare the business for lender scrutiny, build the data room, shortlist the lenders who underwrite your profile, run a competitive process and negotiate terms. Few owners have the time to tour the market themselves, and that is exactly why the process matters.
This is where Fuse Capital sits. We run the process as your own capital team, from first conversation to completed transaction, with 200+ direct lender relationships to draw on. We have advised 600+ clients, most of them owner-managed businesses that had never raised capital before. We help fund the move the deal makes possible.
To be clear, Fuse Capital is an advisory firm, not a lender. We work with revenue-generating companies to structure the right financing and secure it through our network of more than 200 direct lender relationships.
We do not sell one lender's product. The point of this market shift is that you now have a choice, so the job is to make the choice work for you. The businesses that act while the market is broad get the widest selection and the best terms. That is the practical edge this shift creates, and it goes to whoever moves first.
Talk to our team about growth debt for your business.
Growth debt questions, answered
Is growth debt only for software companies?
No. Growth debt grew up around VC-backed software, but lenders underwrite cash flow, not code. Profitable operating businesses with EBITDA of £500k to £5m run on the same logic: revenue that covers interest and repayment. Gyms, clinics, cafés and service businesses fit boxes that most owners never knew existed.
Can a profitable, non-software business raise growth debt?
Yes, if the business is profitable and its cash flow demonstrably covers interest and repayment. Lenders look for a clear use of funds, several years of trading and an owner who stays in control. A business that never raised is usually cleaner to underwrite, not harder.
How does growth debt work?
A lender provides capital against the strength of your cash flow, repaid from operating profit over an agreed term, with a structure set to fit the business. You keep full control and all the equity. Financing is typically £2m to £25m, and a term sheet typically lands in 6 to 8 weeks.
What do growth lenders look for?
Provable revenue, profit, cash flow that covers interest and repayment, a clear use of funds, and an owner who will keep running the business afterwards. Most lenders want several years of trading history. A funding round is not required, and for many lenders its absence is a plus.