Where lender appetite actually sits right now

The UK mid-market debt market in April 2026 is functional but selective. Lenders are active. The problem is that their appetite is concentrated in a narrower band of credit profiles than it was two years ago, and the spread between what a well-prepared borrower can achieve and what a poorly-prepared borrower gets offered is as wide as it has been in a decade.

What the banks are doing

The clearing banks — NatWest, Lloyds and HSBC in particular — have re-engaged with mid-market lending after a period of internal restructuring and credit appetite reset. Appetite is back, but pricing reflects the current cost of funds rather than the pre-2023 competitive environment. For a business with £2m to £5m EBITDA, a clean balance sheet and a predictable cash flow profile, senior term debt is available at margins in the 300 to 400 basis point range over base, with leverage multiples of 2.5x to 3.5x EBITDA being the norm for straightforward situations.

Banks are leaning in on:

• Business services with contracted recurring revenue and low capex requirements
• Healthcare and care services with regulated demand drivers
• Industrial businesses with strong asset cover and long-term customer relationships
• Software and SaaS at the lower end of the growth spectrum where cash conversion is demonstrable

Banks are pulling back on:

• Consumer-facing businesses with discretionary spend exposure
• Any business with significant commercial property exposure where valuations remain uncertain
• Early-stage businesses where EBITDA adjustments are doing material work in the model

What the credit funds are doing

The direct lending and credit fund market remains competitive for the right profile. Unitranche structures are pricing at 600 to 750 basis points over SONIA for mid-market transactions, with leverage available up to 4x to 5x for businesses with strong EBITDA visibility. The funds are filling the gap where banks stop, and in some cases offering faster execution and more structural flexibility.

The critical distinction in 2026 is that credit funds are significantly more selective about EBITDA quality than they were eighteen months ago. A management accounts adjustment that adds 40% to EBITDA will not land with a credit committee in the same way it might have done in the looser market of 2021. Lenders are stress-testing adjustments in detail, running sensitivity cases on revenue assumptions and scrutinising maintenance capex in a way that rewards businesses that have done the work upfront.

Where the gap is

The businesses that are struggling to access capital in the current market share common features:

• EBITDA that requires significant normalisation before leverage is workable
• Sectors with visible headwinds (consumer discretionary, commercial property-adjacent)
• Capital structures with existing debt that is already at the limit of what free cash flow can service
• Management teams who have not stress-tested their own numbers before approaching lenders

The businesses getting the best terms are those where the debt capacity case is clear before the process starts — where management can demonstrate headroom under base, downside and stress cases, and where the lender meeting is a presentation of a prepared position rather than a conversation about what the business might be worth.

What borrowers should do with this

The practical implication is straightforward. If you are refinancing, raising acquisition debt or restructuring your capital structure in the next six to twelve months, the preparation phase is more important than the lender selection. Get the financial model right, stress-test your EBITDA adjustments, and understand your debt capacity before you go near a term sheet conversation.

If you want to understand your borrowing capacity before approaching lenders, our debt capacity calculator gives you an indicative read based on your actual numbers. It is not a substitute for a proper debt advisory process, but it is a faster way to understand the range before you commit management time to a lender process that may not get you where you need to go.