News

Credit keeps flowing, the risk keeps building

This week's UK B2B credit signal: credit supply is loosening while receivables risk is rising.

UK B2B credit and lending weekly digest, 28 June to 4 July 2026

Summary

The week’s defining B2B event was a reversal. The FCA’s motor-finance redress scheme was partially suspended by the Upper Tribunal on 2 July, on terms the regulator agreed with four challengers. Lenders no longer have to calculate or pay compensation, or contact eligible customers, until the legal challenges are resolved — with hearings now set for 14–18 December 2026 or 16–26 February 2027 and payments unlikely before 2027. The ~£7.5bn cash-and-capital call the sector was bracing for has just slipped out of 2026. Close Brothers shares rose on the news, and the near-term capital and provisioning pressure on motor-exposed lenders eases — even as the uncertainty is now stretched another six-to-eight months.(2)(6)

The second thread cuts against the gloom: B2B credit is still flowing, and in places growing. FLA asset-finance new business rose 14% in April year on year, with SME asset finance +8% and £69bn of new finance advanced across the first five months (+4%).(4) Specialists and challengers keep scaling into the space the big banks vacated — Time Finance’s record £250m book, YouLend and Maslow Capital deploying, Revolut now a PRA-authorised bank.(19)(21)(22)(23) On the supply side, B2B credit is loosening, not tightening.

The third thread is where the risk actually sits — not in credit supply but in the real-economy creditors. Builders’ merchant volumes remain soft on the sector index (April −3.5% year on year),(7) late-payment notifications to trade-credit insurers are rising ahead of any claims spike,(11) and distress still leads with construction, wholesale and retail.(10) The consumer side matters here only as a read-through: UK housing transactions cooled sharply in May (BoE house-purchase approvals −14.9%, the lowest since December 2023), and fewer completions feed straight into builders’ merchants’ order books and the receivables they carry.(1) Read from the creditor’s side, a merchant selling less while its customers pay slower is running a book that gets riskier after the credit check, not at it — with Howdens (+3.7% over 16 weeks) the resilient counter-signal.(8)

What it adds up to: the supply of B2B credit is loosening while the real economy it lends into is getting riskier — a widening split. Cheap capital and a deferred redress bill make the present read calmer, but asset-finance growth extended into softening trade-creditor demand is exactly the combination that builds loss content quietly. The discipline this week is to treat the redress suspension as timing, not discharge, and to watch the receivables side, where the risk is actually accumulating.

Key developments

Motor-finance redress scheme suspended. The Upper Tribunal suspended parts of the FCA’s PS26/3 redress scheme on 2 July, on terms agreed with four challengers. Firms need not calculate or pay redress, or contact eligible customers, until challenges resolve; substantive hearings fall in December 2026 or February 2027, with payments unlikely before 2027. The ~£7.5bn compensation / ~£9.1bn total-cost event is deferred, not cancelled — near-term relief for motor-exposed banks and specialists.(2)(6)
B2B credit keeps expanding. FLA asset-finance new business rose 14% in April year on year (plant & machinery +36%, business car +18%), SME asset finance +8%, with £69bn of new finance advanced in the first five months (+4%). The specialist and challenger end is scaling precisely where the big banks stepped back — the clearest signal that B2B credit supply is loosening, not contracting.(4)
Services activity contraction confirmed. Final June PMIs: services 48.7 (second consecutive sub-50, steepest since January 2023), manufacturing 52.5 (down from May’s 53.9 four-year high but still expanding), composite 49.4 — a 14-month low. The B2B real economy is softening even as credit to it grows.(3)
Trade-account providers soft as creditors. Builders’ merchant volumes fell 3.5% year on year in April on the sector index (three months to April −7.1%; prices +3.0%),(7) while kitchens held up (Howdens +3.7% over 16 weeks).(8) Late-payment notifications to insurers are rising ahead of claims — the receivables book is where the risk is building.(11)
Housing transactions cool — the B2B read-through. BoE May Money & Credit showed house-purchase approvals −14.9% to 56,205 (lowest since December 2023) and remortgaging nearly halved. Although this is consumer signal, but it propagates into B2B: fewer housing completions soften builders’ merchants’ and developers’ order books over the coming quarter, tightening the receivables they finance.(1)
Specialist property pricing war runs on. Swap-driven competition kept BTL and bridging pricing falling below ~75% LTV — The Mortgage Works, Glenhawk, LendInvest and Landbay among those cutting — even with Bank Rate held at 3.75%. The competition is in specialist and professional-landlord lending, not appetite up the risk curve.(18)
BNPL regulation goes live imminently. The temporary-permissions window closed on 1 July; formal FCA regulation of deferred payment credit takes effect on 15 July. Klarna moved ahead of go-live by extending pay-later options to UK Google Pay users — a checkout-economics event for merchant-facing B2B credit landing now.(13)

Market signals

Credit quality and risk. The risk this week is on the real-economy side, not the lending side. Late-payment notifications to trade-credit insurers keep rising ahead of any claims spike (a pattern that historically leads claims by two-to-three quarters),(11) and Begbies Traynor’s Red Flag data still shows critical distress elevated across all monitored sectors, led by construction, wholesale and retail.(10) The motor-finance deferral moved one large, dated liability out of the 2026 window, but it changed no loss trajectory.(2) The insolvency headline remains the lagging number; the receivables signals are the leading ones.

Credit supply and lending conditions. B2B supply is loosening. Asset finance runs hot (FLA new business +14% in April, SME +8%),(4) specialists and challengers are scaling, and the capital-markets tone is risk-selective but open. The one persistent tightening is structural, not cyclical: with all four big banks out of SME invoice factoring, working-capital demand keeps routing to specialists and fintechs.(15) The picture is more credit chasing a real economy that is itself softening — supply up, underlying demand quality down.

Where risk is building

Trade-account providers — builders’ merchants and wholesalers. The built-world economy’s largest trade creditors are squeezed from both sides: volumes still soft on the sector index (April −3.5%, three months −7.1%) while customers pay slower,(7) and the distress tables lead with construction, wholesale and retail.(10) When a sector’s sales fall and its debtor days stretch, the risk concentrates in its open trade-account book — the exposure that builds after onboarding, not at it. This is the creditor layer to watch most closely.
Housing-chain trade creditors. The cooling in housing transactions (approvals −14.9% in May) is a forward risk not to mortgage lenders but to the B2B chain that rides housing activity: builders’ merchants, materials distributors and developers’ sub-tiers, whose order books and receivables soften a quarter or two after completions do.(1) This is the quarter the pipeline assumption written on a busier spring needs revisiting.
Consumer-facing retail and hospitality. The company voluntary arrangement is back as the tool of choice across retail and food-and-beverage, with rent-reduction restructurings now routine as April’s wage, business-rates and energy step-ups work through.(14) For lenders and asset financiers exposed to pubs, shops and restaurants this is a repricing already due, not a future risk.
Construction’s lower tiers. Tier 1 contractors pay well (Build UK members: ~96% of invoices within 60 days), but the sector still carries the worst late-payment gap in the economy — around 53 days on average against typical 30-day terms — and the coming 60-day cap, retention ban and 8% statutory interest will tighten sub-tier cash flow in transition.(9)(16) Reprice the specialist trades, not the Tier 1s.

Friction signals — where credit is failing

Mainstream banks remain out of working capital. With all four big banks out of SME invoice factoring, firms whose cash is trapped in 60–90-day receivables are pushed toward specialists and fintechs, often at higher cost — and it bites hardest exactly where merchant and wholesale debtor days are stretching.(15)
Higher-LTV commercial and specialist property still hard to place. Specialist capacity and this week’s cuts remain concentrated below ~75% LTV; commercial and development deals above that line stay difficult to place even where headline rates look available.(18) Competition is where deals can be placed, not above it.
Growth extended into softening demand. The real friction is quieter: asset finance and specialist lending are growing (+14%) into a real economy where merchant volumes and housing-chain demand are cooling.(4)(7) Lending more into a book whose underlying demand is weakening is where loss content accumulates without a headline.
Fraud raises the cost of saying yes. Cifas’s Fraudscape 2026 shows first-party fraud still climbing — one in eight adults admit fraudulent conduct in the past year (up from 8% in 2021) and 48% think it ‘reasonable’, with 13% of employees implicated in selling login credentials.(12) Consequence: tighter KYB at onboarding, upward pressure on risk-based pricing in sub-£50k unsecured SME facilities, and loss-rate assumptions on this year’s new lending that should be revisited before the book ages.

Who is doing what

The big four. Lloyds confirmed it is holding its ~£1.9bn Black Horse motor-finance set-aside despite the scheme suspension — the largest motor-exposed bank treating the deferral as timing, not discharge, with SME appetite unchanged and its structural exit from factoring complete.(5) Barclays showed no new lending-appetite signal this week; prior stance holds. NatWest likewise held prior stance — still the most SME-focused of the four, with Lombard asset finance an active wholesale funder to specialists into a rising asset-finance market. HSBC UK disclosed no change to SME appetite. The week’s material bank signal was Lloyds keeping — not releasing — its motor provision through the suspension, a tell that the deferral is read as timing, not relief.(2) None is tightening headline appetite.

Lenders tightening. No lender publicly tightened headline appetite this week. The only tightening is indirect — the completed big-bank exit from factoring and continued selective constraint above ~75% LTV in commercial and specialist property, neither announced as a pullback.(15)

Lenders expanding. Expansion this week was in asset finance and the specialist edge. FLA asset-finance new business +14% in April,(4) and Time Finance’s record £250m book (invoice finance +20%, asset finance +22%) remains the clearest named example.(23) In embedded finance, YouLend extended its Värde partnership to widen its embedded-lending capacity;(22) in development finance, Maslow Capital wrote a £294m facility against two London assets.(21) In specialist property, The Mortgage Works, Glenhawk, LendInvest and Landbay competed on BTL and bridging pricing below 75% LTV.(18) The neobank end strengthened structurally — Revolut now trading as a PRA-authorised UK bank with FSCS-protected business accounts.(19)

Alternative lenders. New fundraising across the specialist lending universe was quiet this week — no fresh capital-markets issuance from the major alternative lenders, with recent facilities all predating the period.

Capital and deployment

The funding signal this week is a deferral and a supply that stays open, not a fresh raise. The redress suspension removes a large, dated 2026 cash-and-capital call from motor-exposed balance sheets — Close Brothers shares rose on the deferral, and the read-across to Lloyds’ £1.9bn provision and the specialist motor book is a near-term easing of the capital question, offset by a longer tail of uncertainty into 2027.(2)(5)(6) Directionally, capital sits marginally cheaper than a base-rate hold implies — swaps eased enough to keep specialist and BTL pricing falling — but it is risk-selective, spent on price competition below 75% LTV rather than on extending appetite up the risk curve.(18)

The capital-markets calendar stayed quiet at the specialist end — no major new bond or warehouse line from the named universe this week; an honest issuance pause rather than a fresh raise. Deposit competition stays live: with the cut path looking nearer again, deposit-takers have a little more room to let savings pricing drift, but the floor under funding costs is softer than a hawkish hold would suggest.

Private credit and debt funds show no new this-week signal; the prior read holds. Debt funds now supply the majority of UK commercial development finance and their disclosed default rate (~20% on the latest Bayes CRE data, versus ~6% market-wide) sits well above the bank book.(24) As specialists compete on price below 75% LTV, the leverage and refinancing risk concentrated in the non-bank development layer remains the part of this market least visible in weekly headlines — worth tracking as the cycle turns.

People moves and leadership signals

Across the specialist and challenger banks, alternative lenders, BNPL, bridging and credit insurance, the week's named signal was in appointments and recognition rather than at Big Four board level.

Atradius promoted Kyle Edwards to Credit Specialties Manager, deepening its UK trade-credit underwriting bench as insurers lean into the rising late-payment signal.(25)
Avamore Capital doubled its origination team, adding relationship managers Lauren Mills and Tom Morrissey — a specialist development lender staffing up into the space the banks are vacating.(21)
Award season underlined where the specialist end is winning: Fleximize took LendTech of the Year at the UK FinTech Awards 2026 and Best Service from a Business Loan Provider at the Business Moneyfacts Awards 2026 (Congrats Peter Tuvey, Stacy Clementson, Luke Horsley, Elizabeth Tansley and team), with Juice named Fintech Business of the Year (congrats Katherine Chan, Mark Jones, James Bouza and team).(20)
Close Brothers Asset Finance promoted Andrea Cesaroni to Chief Risk Officer, up from Head of Integrated Risk — a senior risk appointment at the specialist-lending arm as asset finance grows.
Restructuring capacity-building remains the forward signal: hiring at restructuring advisers continues to run ahead of the flat insolvency headline — firms staffing for more work, consistent with the activity contraction now confirmed in the PMIs.(3)(10)
NACFB membership stands above 1,400 firms and 3,000 registered brokers, with around a third of broker-placed clients previously turned down by a lender.(17) The channel is expanding even as deals get harder to place.

From the industry

Brokers first. For brokers, the week's challenge is less about price than about finding a lender that will say yes. With the big banks out of invoice finance, specialist property lenders holding to their safer, lower-risk business, and about a third of broker clients already turned down somewhere else, the value is in matching each deal to the right lender rather than chasing the cheapest rate.(17) Easier to get funded this week: buy-to-let and bridging loans, and smaller working-capital and asset-finance deals. Harder: bigger or higher-risk property deals, and the working capital the high-street banks have walked away from.

Suppliers and how fast they get paid. The Fair Payment Code — run by the Small Business Commissioner, and the successor to the old Prompt Payment Code — is still the standard to watch, rating signed-up firms gold, silver or bronze on whether they pay within 30 or 60 days. The government's confirmed reforms go further: a firm 60-day cap on payment terms, automatic interest on late payments, a ban on holding back retention money, and a set window to raise disputes.(16) Even before those take effect, the direction is clear. The numbers show where the strain sits: large main contractors in construction pay on time, but further down the chain firms are waiting around 53 days against 30-day terms — so the risk is with the smaller trades, not the big contractors.(9)

Motor finance — the week’s structural event. The Upper Tribunal’s partial suspension is the single biggest read-across of the week for lender balance sheets. For motor-exposed banks and specialists, the immediate effect is relief — no obligation to calculate, pay or contact until challenges resolve, Close Brothers’ shares up on the deferral, and a large dated 2026 cash call pushed toward 2027.(2)(6) The catch is that firms must still hold complaint files, broker records and capital, and Lloyds’ decision to keep its £1.9bn provision signals the ultimate bill is unchanged.(5) For funding lines at motor-exposed specialists, the practical effect is a longer runway to manage the eventual outflow, not its removal.

Asset and invoice finance. The specialist working-capital end stays active behind the bank retreat, and the data now backs it: FLA asset-finance new business +14% in April (plant & machinery +36%, commercial vehicle +5%, business car +18%), SME asset finance +8%, and £69bn of new finance advanced in the first five months (+4%).(4) Time Finance’s record book and Simply Asset Finance’s NatWest/Lombard-funded scaling sit alongside independents holding the invoice-finance and ABL ground the big banks are vacating.(23) As the last big bank leaves factoring, this is the channel SMEs with receivables tied up in 60–90-day terms are routed to — and it is growing, not contracting.

Specialist and bridging market. Swap-driven competition kept BTL and bridging pricing falling below ~75% LTV — The Mortgage Works, Glenhawk, Skipton, LendInvest and Landbay among those cutting.(18) This is professional-landlord and specialist-property lending, not mainstream residential; specialists are adding capacity and cutting price below the line, with the squeeze on higher-borrowing commercial deals, not on appetite to lend overall.

Trade-account providers and trade credit. This is where the week’s clearest real-economy signal sits. On the sector index, builders’ merchant volumes were still negative in April (−3.5%; three months to April −7.1%), while kitchens and finished goods held up — Howdens at +3.7% is the resilient counter-signal to the in-channel split.(7)(8) Credit-management surveys point to firms selling on credit having already shortened terms and tightened follow-up, with trade-credit-insurance take-up rising and bad-debt write-offs near £8 in every £100.(11) For a trade-account provider, the exposure that bites is the customer that passed the initial check and then deteriorates — slowing payments, stretching debtor days, drifting toward a CCJ before any insolvency print. With the housing chain cooling and late-payment notifications rising ahead of claims, the receivables book written on spring’s assumptions is getting riskier through summer.

Credit insurance. Insurers are selective rather than retreating, and their leading signal holds: late-payment notifications are rising across several sectors ahead of any claims spike — historically a two-to-three-quarter lead — with the three dominant carriers, Atradius, Allianz Trade and Coface (~65% of capacity), still active and Coface pencilling UK growth at just 1% for 2026.(11) Cover will tighten sector-by-sector first: hospitality, retail, smaller construction trades and import-heavy wholesale are the likeliest. Credit teams relying on insured limits there should stress-test the book against cover being trimmed, on the insurers’ published stance rather than any announcement.

Wider regulatory agenda. Three threads moved this week. Motor-finance redress was suspended (payments now unlikely before 2027);(2) BNPL goes live on 15 July after temporary permissions closed on 1 July;(13) and the government’s SME-finance and Open Finance work continues to point toward more required credit-data sharing. The direction of travel is more visibility and portability of SME credit information, not less — even as one of its biggest scheduled cash events just slid down the calendar.

Where Grand fits. As well as powering underwriting for some of the most forward-leaning B2B lenders, Grand sits squarely in this gap for trade-account providers: handle the credit check at onboarding, then keep watching what happens while exposure builds — the slowing payments, stretching debtor days and early distress signals that precede a write-off on an open trade account. As B2B credit keeps flowing into a softening real economy, continuous monitoring of live customers is the protection a one-off check can’t give. See the latest at heygrand.com.

What this means

Where risk is rising: in the open trade-account books of merchants and wholesalers whose volumes are soft while sector distress climbs; in the housing-chain trade creditors that soften a quarter after housing transactions cool; and in consumer-facing retail and hospitality where the CVA is again routine.(7)(1)(14) The redress suspension lowered one visible liability this week; none of the forward risk signals moved with it.
Where credit is flowing — and where it’s stuck: flowing, and growing, into asset finance (+14%), specialist property below 75% LTV, and challenger/embedded lenders; stuck in bank-channel working capital, where the big-bank exit from factoring leaves a structural gap.(4)(18)(15)
Who’s tightening vs growing: asset financiers, specialists and challengers are growing; the big four are holding provisions rather than tightening appetite; the only real narrowing stays the structural exit from working capital. Motor-exposed lenders got near-term capital relief from the suspension, not a smaller ultimate bill.(2)(5)(4)
What genuinely changed this week: B2B credit supply loosened (asset finance growing, motor-finance capital call deferred) while the real economy it lends into — trade creditors, construction, the housing chain — got riskier. Cheap supply into softening demand is the combination that builds loss content quietly.(2)(4)

Operator actions

Where the week’s signals appear to be landing for credit operators — observations on the direction of travel (not recommendations).

On motor finance: the pause looks like a delay, not a let-off. Lloyds is keeping its full £1.9bn set aside — a sign lenders see this as buying time to prepare for the eventual payout rather than a smaller bill. They still have to hold the complaint files, customer records and capital, with the real reckoning pushed out to 2027.(2)(5)
On asset finance: new lending is up 14% just as the wider economy softens, and that combination is drawing more attention to how this year's loans will actually perform — and whether loss expectations still hold for deals written into weakening demand.(4)
On trade accounts: for businesses that sell on credit, softer sales and slower-paying customers pile the risk onto customers already on the books. The shift is toward tighter terms for new wholesale and construction customers, and toward monitoring existing ones continuously rather than once a year.(7)(10)
On the housing chain: as home sales slow, builders' merchants, distributors and developers tend to feel it in unpaid invoices a few months later — which points to watching housing-exposed customers earlier, not waiting for the sales figures to confirm the slowdown.(1)
On fraud: with more customers misrepresenting themselves to get credit — and more people seeing that as acceptable — lenders are looking harder at their checks and their loss assumptions on smaller unsecured business loans, especially this year's lending as it matures.(12)

Week ahead

Mid-July — Insolvency Service company insolvencies for June: the first month that might begin to reflect the services contraction now confirmed in the PMIs.
Mid-July — FLA monthly statistics: tests whether the +14% asset-finance pace held into May.
15 July — BNPL formal regulation goes live (FCA, Deferred Payment Credit): affordability checks, Consumer Duty and Ombudsman access take effect for merchant-facing credit.
Late July — H1 bank results season opens (Lloyds, Barclays, NatWest, HSBC): first read on how motor-finance provisions are treated post-suspension, and on SME impairment direction.
30 July — next BoE Monetary Policy Committee decision: market pricing a nearer cut after the weak activity data; watch the vote split and any read on business-lending conditions.
Ongoing — swap-rate path and specialist repricing; oil and the Middle East as the main outside influence on funding costs.

Upcoming events

15 July 2026 — BNPL formal regulation goes live (FCA, Deferred Payment Credit).
23 July 2026 — Howdens H1 results. Read on the resilient end of the merchant channel.
Late July 2026 — Big Four H1 results season (Lloyds, Barclays, NatWest, HSBC UK). Motor-finance provisioning and SME impairment direction.
30 July 2026 — BoE Monetary Policy Committee decision and minutes.
14–18 December 2026 / 16–26 February 2027 — Upper Tribunal hearings on the motor-finance redress challenge.
1 January 2027 — Basel 3.1 implementation (PRA). One-year delay confirmed; SME-lending support factors preserved.

References

Shout-out to the credit and risk leaders whose firms featured this week

Kyle Edwards on his recent promotion to Credit Specialties Manager at Atradius; Andrea Cesaroni, newly Chief Risk Officer at Close Brothers Asset Finance; Stacy Clementson, Head of Credit & Underwriting at Fleximize; Christophe Souquet, Underwriting Director UK & Ireland at Coface; and Andrew Pinfield, Chief Risk Officer at Maslow Capital.