Lower mid-market businesses confident in funding landscape – but underusing alternative finance tools
Lower mid-market businesses remain highly confident in their ability to secure funding for growth, according to new research from business advisory group Dow Schofield Watts. However, the research also reveals that many are failing to explore the full range of funding options available to them.
The UK Growth Census, which gathered insights from 500 businesses with annual turnover between £10m and £150m, shows that 89% of businesses express net confidence in securing funding, with more than half (51%) saying they feel “very confident”. Yet despite this, just 9% have used debt finance, and only 10% have made use of asset-based lending (ABL), indicating that these more flexible forms of funding remain underutilised across the board.
Most firms continue to rely on a mix of private equity (21%), internal cash flow (20%), and traditional bank loans (14% to support their growth ambitions. Public investment and venture capital each support 13% 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%), whereas those with 250–500 employees are more likely to rely on private equity (24%), 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% 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.”
Download the full UK Growth Census report here: https://dswcapital.com/uk-growth-census-2025/