Why business borrowing is spiking
Recent data suggests more businesses are borrowing to pay tax debt and fund working capital.
Funding Circle’s 2025 lending data shows tax-related business borrowing rose to £25 million, up 29% from the previous year. Borrowing for tax payment accounted for the biggest increase (13%) in average loan size for any purpose.
‘SMEs are not only borrowing for tax liabilities more frequently, but are doing so in larger amounts each time’, according to the analysis. These figures come at a time when HMRC tax debt enforcement activity is getting back to pre-Covid strength. Escalation measures at its disposal include the ability to require banks and building societies to make payments directly from a current or savings account. It is therefore worth remembering that HMRC does offer Time to Pay arrangements to businesses with temporary financial issues.
Cash flow is another area highlighted by the Funding Circle’s data, with borrowing for working capital accounting for 37% of loans, a jump of 17% on previous figures. The biggest jump, however, was for businesses to refinance existing debt. This category went up by 33%.
The importance of managing cash flow can never be overstated. So whether your business is looking to finance capital expenditure, make cost-saving decisions, or model next-step trading scenarios, we can help. Please contact us for advice.
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