SME Lending in Ireland: The 2025–2026 Shift Every Business Needs to Know About

28 Nov

Irish SMEs are heading into 2026 in a lending environment that looks nothing like the one we had even two years ago. Rates are easing, demand for credit is falling, non-bank lenders are expanding, and State-backed schemes are reshaping long-term investment decisions.

For business owners planning budgets for 2026, the message is simple:
Doing nothing is now a bigger risk than doing something.

Below is a clear breakdown of the trends shaping SME finance today; and what they mean for your decisions in the next 6–12 months.

1. Interest Rates Are Finally Softening; but Not Everywhere

Average SME loan rates have slipped from the highs of 2023–2024.
Banks remain cautious on term lending and still scrutinise cashflow harder than before.
Non-bank lenders are not cutting rates at the same pace, but they are offering more flexible structures.
The gap between “headline rate” and “total cost of funds” (fees, term, structure) matters more than ever.

Impact on SMEs:
If you’ve been delaying investment, the next 12 months could be the most cost-effective window you’ll get.

2. SME Borrowing Levels Are at a Decade Low

Irish SMEs are now carrying the lowest level of debt since 2015, driven by:

Post-Covid caution
High inflation years
A push to deleverage
Reluctance to apply for funding unless absolutely necessary

But here’s the challenge:
Low debt sounds good; until it stops you investing in equipment, people or capacity. Under-investment is now becoming a real competitiveness threat.

3. Non-Bank Lenders Are Taking More Market Share

Traditionally, SMEs had one option: their bank.

Not anymore.

Non-bank lenders now account for one-third of new SME lending.
They typically provide:
- Faster turnaround
- More flexible security options
- Interest-only structures
- Bridging/expansion funding banks won’t touch
Many SMEs now use mixed funding - bank for long-term, non-bank for working capital or growth.

Impact:
Your funding strategy for 2026 shouldn’t start with “Who will lend to me?”
It should start with “What structure fits my business best?”

4. State-Backed Schemes Are Expanding (Especially Green Finance)

2025–2026 will see accelerated rollout of:

Growth & Sustainability Loan Scheme (GSLS)
Sustainability-linked loans
Long-term investment supports (10–12 years)
New partnerships between SBCI and non-bank lenders

Impact:
If you’re investing in energy, efficiency, expansion or automation, these schemes can radically reduce cost, but the paperwork is demanding.

5. What This Means for 2026 Planning

If you’re budgeting now for 2026, consider:

Start preparing your funding pack 3–6 months before applying.
Don’t rely on your existing bank alone.
Map bank + non-bank + State options before deciding.
Get clarity on security, covenants, term and early repayment rules.
Model “worst-case cashflow”; lenders now expect it.

How NextStep Helps

At NextStep Business Solutions (nsbs.ie), I help Irish SMEs:

Identify the most realistic funding options across all lenders.
Prepare lender-ready plans, projections and supporting documents.
Save time by managing the entire process while you stay in control.
Build a funding strategy that aligns with your 2026 growth plans.

If you’re planning investment or budgeting for 2026 and want clarity on the best funding approach, I’m happy to help.

Robert Meehan