Industry leaders call for greater clarity and collaboration in funding Defence & Security SMEs

The UK is getting more serious about defence. The funding environment, however, is still catching up.

That was the clear takeaway from a Defence & Security roundtable hosted by Heligan Group and Growth Lending, where lenders, investors and sector specialists compared notes on what it actually takes for SMEs to secure finance in this space.

There’s no shortage of rhetoric about strengthening the UK’s defence industrial base. But for many of the businesses expected to deliver that ambition, access to capital remains inconsistent at best.

Matt Croker of Heligan Group described a disconnect between policy intent and practical outcomes. Government and industry broadly agree on the direction of travel, but that alignment hasn’t yet translated into a funding system that works for the companies doing the work.

A big part of the problem is structural. Defence businesses don’t fit neatly into standard credit models, and treating them as if they do is part of the issue. Revenues can be lumpy, contracts stretch over years, and procurement timelines are rarely predictable. Many SMEs are also investing ahead of growth, which can make them look weaker on paper than they really are.

Chris Mears of Growth Lending made the point that while appetite is improving, a lot of funders are still adapting how they assess risk in the sector. In practice, that means good businesses are still being judged against frameworks that weren’t designed for them.

The investment landscape itself isn’t helping. Some investors have moved quickly to increase exposure to defence, while others are still working through internal ESG positions. That hesitation is understandable, but it adds to a market that already feels fragmented and, at times, opaque.

The result is a slightly uncomfortable middle ground: plenty of talk about supporting defence SMEs, but a funding process that remains difficult to navigate and slow to respond.

What’s missing is coordination. There’s no clear front door for SMEs trying to understand where to go for funding, or which lenders and investors genuinely understand the sector. Organisations like Make UK Defence, ADS and the MOD are part of the picture, but the ecosystem still relies too heavily on who you know rather than a system that works consistently.

That matters, because these businesses aren’t peripheral but central to how the UK delivers capability. If they can’t access the right capital at the right time, growth stalls, innovation slows, and strategic ambitions start to look a bit optimistic.

The funding is starting to move in the right direction. But unless the structures around it evolve as well, the gap between ambition and execution is going to remain.

The roundtable was attended by SMEs and Defence focused expertise from ADS Group, West Midlands Defence Cluster, HCR, Browne Jacobson, Partners&, Mercia, Lloyds, NatWest, Growth Lending and Heligan Group.