By Richard Bowles, senior relationship director, Thincats 424j3w
Research shows that borrowing can be a powerful driver of sustainable growth, especially for mid-sized businesses. External finance is particularly important for smaller companies in ing business investment and ensuring they reach their full growth potential. Yet many UK SMEs are increasingly hesitant to take on debt.
A recent report from the British Business Bank (BBB)1, the government’s economic development agency, shows that only 43% of smaller businesses accessed external finance in the second quarter of last year, down from 50% at the end of 2023. Even more striking, 77% of these businesses said they would rather accept slow growth than borrow to expand.
Business investment in the UK has lagged other G7 countries since the mid-1990s and this lack of investment is contributing to the nation’s ongoing productivity challenges. With mid-sized SMEs ing for more than 25% of UK GDP, it is vital that these companies continue to achieve growth. However, they often struggle to access the finance they need to achieve it.
The growth case for borrowing
New research from alternative lender ThinCats shows a clear link between strategic borrowing and higher growth. ThinCats Growth Lens report, based on data from nearly 200,000 UK firms, shows that companies borrowing between £5 million and £10 million are more than twice as likely to achieve ‘super growth’—growth of 50% above inflation. Those borrowing over £10 million are three times as likely to reach this growth threshold, and twice as likely to experience strong growth of 25% to 50%.
Additionally, when these borrowers also had private equity investment, their likelihood of achieving Strong Growth doubled, and the chance of reaching Super Growth rose to four times the average.
Debt doesn’t equal insolvency
Contrary to perception, the data shows that these gains do not come at the cost of increased insolvency. From 2007 to 2023, the average insolvency rate for UK mid-sized firms has remained steady at 1.4% even for those that borrow.
ThinCats’ analysis finds that a business borrowing £5 million is 16 times more likely to achieve super growth than face insolvency. Overall, firms that borrow are 31 times more likely to grow than to fail.
Why many SMEs are missing growth opportunities
Despite these numbers, smaller businesses tend to rely on short-term finance solutions, such as credit cards and overdrafts, with a focus on managing cash flow. A lack of longer-term funding means investment in areas that truly drive growth – like new technology, equipment or market expansion – is often overlooked. This restricts smaller companies’ ability to scale.
Limited access to affordable finance and fear of debt are common obstacles. Political and economic uncertainty are also factors. Chief Executive of the BBB, Louis Taylor, highlighted a particular hiatus last year around the budget and election. “There was a period where people sat on their hands,” he said. “If we are to achieve the growth we all want in the UK economy, it is important that we continue to make the case for business investment.”
Waiting too long to act can mean missing vital opportunities.
Borrowing with purpose
But that does not mean all borrowing is worthwhile. The key is to borrow strategically. If your business has strong fundamentals and a clear growth strategy, targeted funding can help you scale faster, become more resilient, and compete more effectively. The benefits of investment far outweigh the perceived risks, particularly for mid-sized firms.
It is time to rethink the role of borrowing—not as a last resort or a high-risk approach but as a valuable, strategic driver of business growth and success.
1. Small Business Finance Markets Report 2025
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