Lenders told the Bank of England that the availability of credit to small businesses fell in the three months to the end of August 2026, the second quarterly fall in a row and the sharpest reported cut since the end of 2020, according to the Bank's Credit Conditions Survey published on 8 October 2026.
The survey's net balance for credit availability to small businesses was -12.1 in the third quarter, down from -9.1 in the second quarter. In the four quarters before that, lenders had reported credit becoming more available, with balances of between +12.0 and +24.2.
Small Cap News checked the Bank's back data, which runs from the end of 2009. Only one reading for small businesses has been lower: -19.3 in the final quarter of 2020.
Lenders expect a further cut
Lenders expect availability to small businesses to fall again in the three months to the end of November 2026, with an expectations balance of -9.3. That is the weakest outlook lenders have given for small firms since the third quarter of 2022, when the balance was -10.9.
Larger companies are being treated differently. Credit availability to medium-sized businesses also fell, with a balance of -10.5, but availability to large businesses was unchanged at +4.1. Across the corporate sector as a whole the balance was -0.1, which the Bank classes as unchanged.
Demand from small firms falls again
Lenders also reported weaker demand for loans from small businesses. The demand balance was -12.1, after -11.1 in the second quarter, and lenders expect demand to fall slightly again in the fourth quarter, with a balance of -6.4.
The balance for the share of small business loan applications being approved was +0.4, effectively unchanged after -11.1 in the second quarter. Lenders expect approval rates for small firms to fall in the fourth quarter, with a balance of -9.3.
Prices and defaults steady
The squeeze is not showing up in loan pricing or bad debts. Spreads on loans to small businesses were unchanged by the Bank's definition, at -4.8, as were fees (+0.8) and collateral requirements (0.0). Default rates on loans to small businesses were unchanged, at +1.9, and lenders expect them to stay that way.
The Bank's separate Money and Credit release for August, published on 29 September 2026, showed small and medium-sized businesses borrowed a net £0.9 billion in August, with annual growth in their borrowing rising to 4.6% from 4.1% in July.
About the survey
The Credit Conditions Survey asks banks and building societies how credit conditions have changed. It was conducted between 17 August and 4 September 2026. Responses are weighted by each lender's market share and expressed as net balances between -100 and +100. The Bank describes a balance below -10 as a decrease and one between -5 and -10 as a slight decrease. The results reflect lenders' own views, not the Bank's, and the Bank does not publish how many lenders took part.
Key facts
- Small business credit availability balance: -12.1 in Q3 2026, after -9.1 in Q2
- Lowest reading since -19.3 in Q4 2020, in data back to late 2009
- Lenders expect a further fall in Q4 (balance -9.3)
- Medium-sized businesses -10.5; large businesses +4.1
- Small business loan demand -12.1; defaults unchanged at +1.9
- Survey conducted 17 August to 4 September 2026; next edition due 14 January 2027
Source: Bank of England, Credit Conditions Survey 2026 Q3, published 8 October 2026 (bankofengland.co.uk), and Money and Credit August 2026, published 29 September 2026. See also: Data & Surveys, Funding and how to send us your news.