Equity remains in short supply
A vast majority of UK specialist lenders are preparing to renew, expand or restructure their debt arrangements over the next two years, reflecting growing demand for loan funding and increased competition, according to new research from advisory firm Interpath.
The Interpath Specialist Lender Survey, conducted with JP Morgan, found that 92% of surveyed lenders expect to seek new or amended debt facilities within the next 12 to 24 months. The study captured insights from over 100 lenders with combined loan books totalling £54.9 billion.
The findings point to growing activity and confidence in the specialist lending space. Supporting this trend, a separate white paper by United Trust Bank (UTB) revealed that 72% of mortgage brokers believe the specialist market now presents greater opportunities than ever. In line with that outlook, 60% of brokers reported writing more specialist cases over the past 12 months compared to the year before.
The growth in lending activity is driving capital demand. As lenders look to support expanding portfolios and diversify their funding sources, access to equity remains a concern. More than one in four (26%) of Interpath’s respondents said they lacked sufficient equity for the next two years, creating potential for further consolidation and new funding models.
“The specialist lending sector has achieved remarkable success in recent years fuelled by the growth of capital solutions,” said Stuart Mogg (pictured far left), managing director and head of financial services capital and debt advisory at Interpath.
He noted that lenders are benefiting from favourable conditions such as reduced fees and added financing options, even for non-performing loans, allowing for enhanced risk management and liquidity.
The research also points to an evolving funding landscape. Founder-led businesses continue to dominate the sector, appearing in the capital structure of 80% of respondents. However, 58.6% of those surveyed said they are considering a full or partial exit within the next five years, with 12.1% eyeing an exit within two years. This trend is expected to attract more involvement from institutional and private equity investors, which currently appear in 25% and 20% of capital stacks, respectively.
“The findings of our survey paint a picture of a sector in transition,” said Nick Parkhouse (pictured second from left), managing director and head of financial services deal advisory at Interpath. “There is a clear signal that M&A activity will start ramping up in the coming years.”
Despite a generally optimistic outlook, the sector is not without challenges. Macroeconomic stress remains a concern for 63% of lenders, although its perceived threat has declined compared to last year. In contrast, competitive pressure has risen, with 25% now citing it as their top challenge for 2025.
“Clearly, competition is on the minds of industry leaders,” Mogg added. “Lenders need to have the capacity to pivot in their capital strategies.”
Institutional partnerships are also seen as crucial, especially during uncertain market conditions.
“Strong and trusted institutional funding relationships remain key to specialist lenders,” said Rob Tanna-Smith (pictured second from right), executive director at JP Morgan.
“With over a quarter of lenders needing to raise equity and nearly all respondents looking to raise or refinance debt in the next two years, capital providers are poised for a bustling period ahead,” added Ben Tucker (pictured far right), securitised products group sales at JP Morgan.
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