New research from business advisory firm Dow Schofield Watts reveals that lower mid-market businesses in the UK remain highly confident about accessing funding for growth. However, many are failing to explore the full spectrum of finance options available.
According to the UK Growth Census, which surveyed 500 firms with turnover between £10m and £150m, 89% expressed confidence in securing funding—51% of them feeling “very confident.” Despite this optimism, uptake of flexible funding options remains low, with just 9% using debt finance and 10% leveraging asset-based lending (ABL). The findings highlight a gap in awareness and utilisation of alternative finance solutions.
Most firms continue to rely on a mix of private equity (21 per cent), internal cash flow (20 per cent), and traditional bank loans (14 per cent) to support their growth ambitions. Public investment and venture capital each support 13 per cent of firms. Usage of funding sources varies by business profile, with firms with a lower annual turnover more likely to draw on reinvested profits and venture capital, while those with turnover above £100m taking a more diversified approach.
The research shows that funding strategies also shift by headcount. Businesses with 100–249 employees report the highest use of internal cash flow (22 per cent), whereas those with 250–500 employees are more likely to rely on private equity (24 per cent), suggesting that both organisational size and turnover play a role in shaping capital decisions.
Phil Tarimo, partner in the debt advisory team at Dow Schofield Watts, commented: “Debt finance can be a valuable tool for businesses looking to scale efficiently without diluting equity. Yet, many businesses remain hesitant due to misconceptions around cost, complexity, or risk. A well-structured debt facility can provide operational and financial flexibility while supporting long-term strategic goals. Whether funding growth, acquisitions, or working capital, businesses should ensure they are taking full advantage of senior debt solutions that align with their objectives.”
Despite its potential to unlock liquidity from receivables, inventory, plant, and machinery, ABL is also underused. While uptake peaks at 14 per cent among firms turning over £50m–£99.99m, it remains low across all revenue brackets.
Hazel Lomas, partner in the asset-based lending risk management team at Dow Schofield Watts, added: “ABL can provide businesses with a highly flexible and scalable funding structure, particularly in uncertain economic environments. By leveraging tangible assets, businesses can unlock capital that might otherwise remain tied up, offering greater stability in managing working capital and funding expansion.
“However, the effectiveness of ABL depends on robust risk management. Lenders are increasingly focused on due diligence, collateral quality, and ongoing monitoring, which means businesses must ensure they have the right financial structures in place to make the most of these facilities.”
