High street businesses turn to flexible finance as cost pressures bite

Demand for external funding among UK high street businesses has surged, as rising costs continue to squeeze margins across the retail and hospitality sectors.

New data from award-winning lender 365 Finance shows a sharp increase in the use of revenue-based finance, with restaurants up 43 per cent year-on-year in Q1 2026 compared with the same period in 2025.

Pubs and bars are also increasingly relying on the model, with successful funding applications rising by 39 per cent over the same period, according to the Soho-based lender.

Revenue-based finance allows repayments to fluctuate with takings, offering businesses greater flexibility during quieter trading periods.

The company said the trend reflects mounting pressure on operating costs, including inflation, energy bills, business rates, and increases in the National Living Wage and employer National Insurance contributions.

Total funding issued to food-related retail businesses rose by 42 per cent year-on-year, while other small and medium-sized enterprises in the wider retail sector recorded a 34 per cent increase.

Analysts say the figures point to sustained strain on the high street, with many operators relying on short-term liquidity solutions to manage cash flow rather than traditional lending.

Hospitality businesses in particular are said to be feeling the impact of higher input costs and weaker consumer demand, prompting greater demand for more flexible financing structures.

While alternative finance can help firms bridge volatility, economists warn it may also signal deeper structural pressures in parts of the UK’s consumer economy, particularly in sectors with tight margins and high fixed costs.

The data adds to a growing picture of financial stress across SMEs, even as policymakers look to stabilise inflation and support growth.

Matt Sparrow, Sales Director at 365 Finance, said, “The numbers speak for themselves – high street businesses are under enormous pressure right now, and many owners are looking for smarter ways to stay afloat and keep growing. Revenue-based finance gives them the flexibility to access the funding they need without the rigidity of traditional loans. Repayments move with their sales, which means businesses can breathe a little easier even when trading is unpredictable.”

SMEs within the UK can apply for fast and flexible funding of £10,000 to £500,000, with approvals possible in as little as 24 hours.