If you’re planning to seek funding for growth, working capital or expansion in the coming year, understanding these dynamics will help you navigate the process with realistic expectations and better outcomes.
The price vs. availability challenge
We’re having the same conversation repeatedly with new borrowers. They’re pleased to have secured funding from newer sources. Then they're surprised by the cost.
The reaction is understandable. Many business owners remember bank lending rates from a few years ago and expect something similar. The reality is quite different.
Why funding costs have increased
The fundamental reason is straightforward: lenders' capital expenses have increased substantially. Those costs get passed on in the lending margin.
When traditional banks tightened their lending criteria, alternative lenders stepped in to fill the gap. These lenders operate with different cost structures and risk profiles. They’re providing funding to businesses that might not meet traditional banking criteria, which means they’re taking on additional risk. That risk is reflected in the pricing.
This isn’t about lenders being unreasonable. It's about the economics of providing capital in the current market.
The real question isn’t just about price
Here’s what we tell business owners who baulk at funding costs: the question isn’t whether the rate is higher than you'd like. The question is whether you can actually get the funding at all.
Availability beats price if the alternative is no funding whatsoever.
We’ve watched businesses turn down six-figure contracts because they couldn’t secure the working capital to deliver. They were trying to save a few percentage points on lending rates. The mathematics didn’t work in their favour.
The cost of funding matters. But the cost of not having funding often matters more.
The hidden benefits of debt funding
When business owners focus solely on the interest rate, they often overlook the broader picture.
Debt funding preserves 100% ownership of your business. There’s no equity dilution. No new shareholders influencing decisions. No loss of control over strategic direction.
Compare that to bringing in equity investors. Yes, you might avoid interest payments, but you’re giving away a portion of your business permanently. That stake could be worth significantly more than the interest you'd have paid over the life of a loan.
Additionally, interest payments are usually tax-deductible. That provides a meaningful offset to the headline cost.
When you compare the true cost of debt versus equity, expensive debt might still be the cheaper option in the long run.
Setting realistic expectations
The key to a less frustrating funding process is understanding what’s realistic before you start.
If you’re approaching alternative lenders expecting high street bank rates, you’re setting yourself up for disappointment. If you understand that funding will cost more but preserves your ownership and provides the capital you need to grow, the conversation becomes more productive.
Experienced advisors can help you navigate these realities. They can secure funding with confidence because they know which lenders are active, what terms are achievable and how to structure applications properly. But they can’t change the underlying market dynamics.
So yes, you can be confident about securing funding by working with professionals who know the landscape. But be prepared to pay the market price for it.
The Growth Guarantee Scheme: new options for non-standard situations
Whilst the price vs. availability dynamic presents challenges, there's positive news in the form of new government-backed support for growing businesses.
The Growth Guarantee Scheme launched in April 2025 and is already proving to be a useful additional option for businesses that don’t fit traditional lending boxes.
How the scheme works
The scheme supports borrowing up to £2m for terms up to six years. It’s available to businesses operating up to £45m in sales.
There are 54 lenders on the panel, including many household names. When you approach one of these lenders, they assess your application normally. If you don’t quite meet their standard criteria, they can use the Government guarantee as additional security.
The guarantee covers up to 70% of the loan. That’s significant protection for lenders and it’s making them more willing to support genuine growth plans that might previously have been
declined.
Who the scheme helps
This isn’t about weak applications getting approved. It's about good businesses with non-standard circumstances getting a proper hearing.
Perhaps your business model is too new for traditional lending criteria. Perhaps your sector is considered higher risk. Perhaps your financials are strong but structured in a way that doesn’t fit standard banking boxes.
Banks are actively considering this scheme to fund situations that would have been automatic declines six months ago. The Government guarantee gives them the security they need to say yes to businesses they might otherwise have to turn away.
Practical application
If you’ve been told “no” by traditional lenders, the Growth Guarantee Scheme is worth exploring.
The application process works through the panel lenders, so you’d approach one of the 54 participating institutions directly. They handle the assessment and, if appropriate, apply the Government guarantee to support the lending decision.
It’s not a silver bullet. Your application still needs to demonstrate solid business fundamentals and a credible growth plan. But it opens doors that were previously closed to many businesses with genuine expansion ambitions.
Planning your 2026 funding strategy
As we head into the new year, it’s worth taking time to assess your funding requirements properly.
If you know you’ll need capital in 2026, starting the conversation now puts you in a stronger position. Funding applications take time. Due diligence doesn’t speed up just because you need an answer quickly.
Understanding the price vs. availability dynamic helps you approach the market with realistic expectations. Knowing about schemes like the Growth Guarantee Scheme means you’re aware of all available options, not just the obvious ones.
The funding landscape has changed. But with the right guidance and realistic expectations, it’s still entirely possible to secure the capital your business needs to grow.
The key is understanding what’s realistic, what’s available and what the true cost of funding is compared to the cost of not having it.
About Obica Business Funding
The business funding market contains many capable advisors, each with legitimate expertise in their specialism. The key is matching your specific situation to someone with proven coverage in that exact area.
This isn't about credentials or years in business. It's about recent, relevant experience with your type of funding, your size of transaction and your complexity level. Take time to select carefully. Ask specific questions. Expect honest answers about what they do and don't cover. A specialist will be clear about their boundaries.
Get this selection right and the rest of the process becomes significantly more effective. Get it wrong and you'll be starting again in six months.
For a confidential discussion about your funding requirements, contact us to explore whether we can help navigate your specific situation.
Get in touch to discuss your 2026 funding requirements.