The asset finance and business lending market faces a period of significant challenge and rapid change. Economic pressures, rising fraud, evolving borrower behaviour and the accelerating adoption of artificial intelligence are reshaping how financial services and professional services firms are operating. Against this backdrop, personal guarantees remain a contested and poorly understood tool, while the broker landscape is undergoing a generational shift.
This report summarises discussion from our Round Table event hosted by our Partner, Brendan Clarkson and Mahesh Vara from Shoosmiths, attended by senior professionals from asset finance, insolvency, fintech lending, debt recovery, invoice finance and legal services.
1. Supporting Clients through turnaround, not just the decline curve
The opening discussion explored how the industry can better support clients who have genuine prospects of recovery, rather than simply managing the final stages of business failure. The consensus was that early intervention is critical and that the industry is improving, but not yet where it needs to be.
Where there is no foul play, pulling in advisors early to explore pre-pack options, restructuring, and salvageable value is the right approach. Viability and collectability are used as key measures. Businesses that are caught early in the decline stage can often be supported through up to three funding rounds before more formal intervention is required.
Cashflow loans are rising sharply in both volume and size. Loans that once averaged around £100,000 are now commonly reaching £400,000 to £500,000, with approvals and drawdowns possible within days. The speed of access is seen as an asset, but also a risk – raising questions about whether sufficient planning and affordability assessment is taking place before funds are released.
HMRC-related difficulties are also increasing. Time to Pay arrangements are being explored more frequently, and open banking is improving lenders’ visibility into client finances. However, injecting further cash into a business with structural affordability problems often simply delays the inevitable.
Personal Guarantees
Personal guarantees were a recurring theme throughout the round table, with broad agreement that their role in the market is improperly understood at multiple levels.
An estimated 64% of PG enforcement actions relate to bankruptcies and HMRC cases. Where a business has no assets and a pre-pack is not viable, the PG becomes the primary recovery mechanism which sometimes leads to simultaneous CVAs and IVAs for the same director. The lack of a PG register was again raised as an unresolved industry issue. There is wide support for one in principle but concerns around data privacy and public disclosure remain the primary blocker.
Participants stressed the importance of ensuring guarantors receive independent advice and that this is properly documented, particularly in joint and several liability situations. Credit managers do not always understand the implications of the PGs they are processing, and the construction sector was highlighted as especially high-risk in this regard.
A question was raised as to whether PGs actually increase total lending in the market – the argument being that by giving lenders additional security, they enable more credit to be extended than would otherwise be the case. This remains a live debate.
Broker conduct and accountability
Lenders reported having to push back more frequently on broker-sourced applications where the declared purpose does not match the actual use of funds. A new generation of brokers are commission-focused and often lack the product knowledge or professional standards of their predecessors which is another challenge that needs to be taken into account. An absence of formal training, auditing, and accountability in parts of the broker market has seen several firms responding by building in-house origination teams to maintain quality control.
2. Is the market more dangerous?
Participants were broadly aligned: the market is not simply more dangerous, but it is more complex, more fragmented and less well understood by many of those participating in it.
Fintechs have a legitimate and valued place in the market. Their agility and speed of decision-making meets a genuine need, and their pricing reflects the risk they take. However, the proliferation of funding lines mirrors trends seen in consumer lending and there is concern that the SME market is heading in a similar direction which wouldn’t be a good thing.
Fraud is increasing in both volume and sophistication. Misappropriation of assets, ghost vehicles, and the use of artificial intelligence to generate fraudulent documents are all growing trends, particularly at the application and exception stage. The question of whether borrowers are genuine businesses that have drifted into fraud, or systematic fraudsters from the outset, was posed directly. The answer was both.
Debt is now widely sold across the market. Trade creditors, specialist firms and law firms are all active in this space. The complexity this creates for recovery, particularly where multiple PGs and funding lines are involved, is a growing operational challenge.
3. Default and late payment fees
Do default fees serve a genuinely productive purpose, or simply represent an additional income stream that can damage recovery prospects?
Some firms charge daily delay fees (cited at £40 per day in one case) which participants viewed with scepticism, particularly where the debtor is already experiencing cashflow difficulties.
The prevailing view was that default fees are most effective as a negotiating tool rather than an enforcement mechanism. Waivers and structured negotiations are more typical outcomes than enforcement. In other markets, such charges are treated as standard practice, but the UK lending community appears more cautious.
The threat of debt being passed to a third-party collector was itself identified as a more powerful deterrent than the fee itself. Firms regulated under UK Finance codes noted that their approach to fees is self-regulated and aligned to their conduct obligations.
On the question of fraud, participants agreed that where assets are available and fraud is established, lenders should pursue both capital and fees. In standard enforcement, recovery of capital should be the primary objective; with excessive fee-chasing risking the breakdown of any remaining negotiated resolution.
4. The impact of geopolitical and economic pressures
The group reflected on how prolonged geopolitical instability, inflationary pressures and rising costs are affecting business viability and lending decisions. There was some debate about how much of the current inflation is genuinely war-driven versus being used as justification for broader price increases.
If tensions are prolonged, a recession is considered likely. Several participants noted that their younger team members have not experienced a downturn and are taking proactive steps to prepare staff: communicating warning signs, explaining what a deteriorating book looks like, and building readiness for a more difficult environment. The 2008 credit crunch was cited as the last comparable experience.
Key macro pressures identified by the group included: inflationary cost increases across supply chains; rising energy prices disproportionately affecting businesses; potential upward pressure on interest rates; and food price inflation forecast to reach 9–10% by the end of 2026 (Food and Drink Federation). The effect of these pressures is not limited to businesses/ They cascade into household finances and personal affordability, with knock-on effects for borrowing behaviour and default rates.
The construction sector was again highlighted as particularly exposed: surcharges are being added to invoices to cover cost uncertainty, and there are genuine concerns about whether projects can be completed within original budgets. Transport and logistics businesses are also under acute pressure from fuel costs.
However, many businesses are showing resilience. Forbearance is being kept under review. Some watch lists have grown, though this partly reflects better monitoring rather than purely an increase in distressed cases. Several firms are now proactively offering short-term forbearance as a service, rather than waiting for borrowers to approach them.
5. Adoption of Artificial Intelligence and Machine Learning
Approximately 25% of those present reported having adopted AI tools within their businesses, with interest and momentum clearly building across the room.
Claude (Anthropic) was cited by multiple participants as a tool being used for financial modelling, data review, drafting correspondence and RAG status assessments. Work that previously took two to three hours is being completed in minutes. One firm has built their collections drafting system from scratch using AI, drawing on an approved language and template library but with human review retained at the point of sending. Engineering teams are using AI to reduce manual coding, with staff reviewing outputs rather than writing from scratch.
The consensus on AI as enhancement rather than replacement was clear – at least for now. The “human first” principle was emphasised across underwriting, correspondence and client-facing decisions. Accountability must remain with a named individual. Participants acknowledged that AI is not always right first time, but that it is learning and noted that using AI to check AI is itself an emerging practice.
AI is making high-quality financial analysis accessible to smaller businesses, which could meaningfully improve the quality of decision-making among the SME borrower base. Several firms with US parent companies noted that their counterparts across the Atlantic are significantly more advanced in AI investment, providing a useful preview of where the UK market is heading.
Communication preferences are also shifting. Borrowers under 26 increasingly prefer digital channels (text and email) over phone calls, with implications for collections, customer engagement and product design. Klarna was cited as a benchmark: 90% of communications handled without human involvement.
The group agreed that AI will change roles rather than eliminate them, but that the pace of change requires active management, investment in staff development, and a clear organisational policy on what AI is and is not authorised to do.
Key themes and challenges for the year ahead
The primary challenges identified by the group for the coming period include:
- Fraud and document manipulation: Increasing sophistication in fraudulent applications, including AI-generated fake documents and ghost assets. The industry response is evolving but uneven.
- Personal guarantee complexity: A poorly understood tool at multiple levels of the market. A PG register remains urgently needed but undelivered.
- Broker standards: A generational shift in the broker community has introduced a commission-driven approach with limited product knowledge and accountability.
- Macro-economic pressures: Rising costs, potential interest rate volatility and sector-specific stress are expected to produce casualties, particularly in construction, hospitality and logistics.
- AI governance: The pace of AI adoption is outstripping policy and regulation. Firms need clear frameworks for responsible use, accountability and oversight.
- Borrower education: Many business owners – and some directors – have not experienced a downturn and lack the financial literacy to navigate the current environment safely.
Conclusion
Lending and advisory firms are navigating a market that is simultaneously more accessible, more fragmented and more exposed to fraud than at any point in recent memory. Fintech’s have brought genuine innovation and speed; they have also introduced new risks. The proliferation of funding lines, the erosion of broker standards and the absence of a PG register are structural issues that the industry has discussed for years without resolution.
Against this backdrop, there is a community that is engaged, clear-eyed and broadly collaborative. The adoption of AI is accelerating and presents a genuine opportunity to improve efficiency, support smaller businesses with better financial insight, and detect fraud earlier. Success will depend on the industry’s ability to embrace that opportunity responsibly, while maintaining the human judgment and accountability that lending decisions ultimately require.
If you would like to discuss any of the points in the report, we’d be happy to connect you with our Partner, Brendan Clarkson who chaired this event or to a team delivering a specific service you require. We have offices nationwide and by contacting us on 0203 995 6380, or emailing support@opusllp.com, we can direct your enquiry accordingly.
If you would like to read our previous Round Table reports, click here.