External finance use among Welsh SMEs rises sharply, report finds

Daniel Bevan - Senior Journalist

The use of external finance among small and medium-sized enterprises (SMEs) in Wales surged in late 2024, rising to 57% from 49% the previous year, according to the newly published 2025 Wales SME Access to Finance Report.

The report, jointly produced by the British Business Bank and Economic Intelligence Wales, provides a comprehensive view of finance usage among 500 Welsh SMEs, surveyed in October 2024. It aims to map out both the demand for and supply of finance in Wales, while placing findings within broader national and regional economic contexts.

Finance Trends and Growth Signals

Credit cards emerged as the most frequently used financial product among Welsh SMEs, with 25% of businesses relying on them, followed by Covid-related loans (23%) and overdrafts (16%).

Looking ahead, 21% of surveyed SMEs anticipate needing further finance in the coming year—up from 16% the year before. Of those, more than half (56%) are considering business loans, and 37% are looking into grants. Working capital is the top reason for seeking finance (46%), followed by capital expenditure (39%).

While these figures reflect a potentially positive outlook for growth and expansion, the report cautions that many SMEs are also relying on finance for survival—highlighting a mix of ambition and vulnerability.

Regional Variations Across Wales

The report also reveals strong regional differences in financial behaviour and sentiment.

In south east Wales, grant uptake was notably low at just 3%, potentially due to the region’s more innovation-focused businesses in Cardiff and Newport, many of which seek equity investment for R&D. This region also had the highest proportion of SMEs (29%) expecting growth in the coming year.

In south west Wales, SMEs showed greater confidence in securing finance, with 75% of businesses expressing optimism despite 26% reporting difficulties in accessing funding—the highest rate in Wales. This region also saw a higher proportion (16%) of SMEs looking to raise over £250,000, driven partly by research and development ambitions linked to initiatives like the Celtic Freeport and Swansea Bay City Deal.

Mid Wales, with its agriculture-based economy, saw the lowest proportion (14%) of SMEs expecting to seek finance, suggesting greater financial stability and less appetite for expansion capital.

Meanwhile, north Wales had the lowest share (4%) of SMEs intending to raise more than £250,000, reflecting the dominance of smaller firms in tourism and retail. Businesses in this region also reported the highest levels of financial strain, with 18% of debt-holding firms saying their debt was unmanageable.

Despite national similarities in perceived barriers to finance, SMEs in south west Wales were most likely to report access difficulties, which the report attributes to the region’s shift from traditional industries to emerging sectors like life sciences and marine tech.

Industry Voices on the Findings

Giles Thorley, Chief Executive of the Development Bank of Wales, welcomed the findings: “This report provides timely and detailed analysis of the current finance landscape for small businesses in Wales.

“It’s encouraging to see that more Welsh businesses are accessing external finance, and that many are planning to grow over the coming year.

“We see first-hand the difference that the right funding at the right time can make.”

Thorley noted that the Development Bank has supported 3,402 businesses over the past five years, investing over £705 million and helping to leverage £335 million more in private investment—adding over £1 billion to the Welsh economy.

Susan Nightingale, UK Network Director for the Devolved Nations at British Business Bank, also welcomed the report’s insights: “Wales is home to a wealth of diverse and dynamic small business, with firms operating across a broad range of sectors—from fintech and life sciences, to manufacturing and tourism.

“The report highlights the unique financial needs and ambitions of smaller businesses across Wales’ different regions, each shaped by its own economic strengths and challenges.”

Nightingale added that the high use of credit cards may reflect ease of access rather than informed decision-making and stressed the need to improve awareness of more suitable finance options.

As Welsh SMEs continue to navigate economic pressures and opportunities, the report underscores the importance of tailored financial support and equal access to capital—particularly in regions where traditional industries are giving way to more innovation-driven economies.”

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