Loan stacking: Why it’s widespread and how best to access funding

31/03/2026

In our role as a commercial finance broker, we are increasingly encountering businesses which are coming under significant cash flow pressure as a direct consequence of accumulating multiple loan facilities – known as ‘loan stacking’.

For some, this began with government-backed loans introduced during the pandemic. For others, it followed as additional borrowing was layered on to support day-to-day operations or growth. The outcome is often the same: a business juggling several high-interest loan repayments each month, which erodes margins and, in more severe cases, impacts overall viability.

What makes this particularly challenging is that many of these businesses are – or at least once were – fundamentally sound. They are trading well, generating revenue and can often demonstrate profitability. Yet, as we see time and again, a profitable business can still fail if cash flow is too constrained and margins are impacted by high interest payments.

A recent client of ours is a case in point. Prior to our involvement, the business had relied on a number of short-term loans to enable them to invest in product development. While effective initially, those facilities were never suitable as a longer-term funding strategy and, arguably, were always destined to become a hindrance to performance, rather than a facilitator. By refinancing part of the existing borrowing into a more appropriate structure, spreading repayments over four years, we reduced monthly repayments by £19,000 – capital that can now be directed back into growth and working capital rather than servicing debt.

This example is far from unique. Thousands of SMEs are currently tied into financing arrangements that delivered short-term relief but are now limiting progress and flexibility. The latest SME Finance Monitor from BVA BDRC found that 17% of businesses using external finance are concerned about their ability to repay existing facilities.

When viewed across the broader SME population, that represents a worrying number of businesses carrying financial anxiety into an already uncertain trading environment.

Pandemic hangover

In our experience, pandemic-era loan schemes have changed attitudes towards borrowing. Loans have become almost a default go-to option (where overdrafts used to sit some years ago), often taken ahead of more tailored funding solutions that would better align with a business’s objectives and cash flow profile.

Alongside other pandemic support measures, many businesses found themselves relatively cash-rich for a relatively long period. However, that surplus has since been absorbed by rising costs, including inflation, energy prices and employment expenses. In response, further borrowing has followed, leaving some SMEs facing heavy monthly repayment burdens.

Loans undoubtedly have a crucial role to play and remain an important tool in the right circumstances. Used appropriately, loans can support stability and growth. Ironically, one of the most effective ways to resolve loan stacking is sometimes to replace it with a single, better structured facility, where there are either no tangible business assets or where these are already pledged. As with our client above, refinancing on improved terms can, where appropriate and possible, significantly reduce monthly pressure and restore financial breathing room.

Given the significant geopolitical uncertainty and the impact this is likely to have on inflation and interest rates, it’s a timely moment for businesses to reassess how they fund themselves and how they maintain reliable access to working capital:

• Are existing facilities genuinely supporting the business?
• Are they helping the business to move forward at an appropriate rate and make proactive decisions?
• Fundamentally, are they the best fit?

Diversity & choice

The breadth of funding available to UK businesses has never been wider. High street banks no longer dominate the market. Challenger banks and specialist lenders now account for around 60% of total gross bank lending, according to the British Business Bank, and lend more collectively than the major UK banks. As a result, funding mechanisms such as invoice finance, asset finance, equity and non bank lending have become much more competitive over the past decade and provide a genuine option for many.

This diversity is especially valuable when funding investment. Different requirements call for different solutions. Asset finance is often well suited where a business has kit (vehicles, machinery, plant etc). Invoice finance can unlock cash tied up in unpaid invoices and provide ongoing working capital. Equity finance can underpin innovation and R&D. Commercial mortgages remain the most appropriate route for purchasing premises such as warehouses or factories.

That said, no two businesses are identical. Many benefit from a combination of facilities, tailored to their needs. The critical step is engaging with an experienced specialist who can work with the business to review the full picture, identify various suitable options, and provide choice and support to enable the business to select and secure the right funding partner for both their current needs and future ambitions.

Whether a business is under cash flow pressure or planning its next phase of growth, the principle is the same. There is significant choice available out there, but the earlier options are explored, the greater the opportunity to put the right funding structure in place.

To discuss your requirements with our team, call 0800 9774833 or request a call back and discover how we can help businesses find the most suitable and supportive funding solutions.