Blended Funding: When Multiple Finance Sources are Your Best Solution
How using multiple finance sources can unlock smarter, stronger growth in 2025
When UK SMEs look for funding, the instinct is often to search for a single solution. But in 2025, the smartest growth strategies increasingly involve blending different types of finance to create a more resilient and adaptable capital structure.
Blended funding allows businesses to combine sources such as bank loans, asset finance, private investment and short-term lending. This approach offers greater flexibility, protects cashflow and can reduce long-term cost. But it also requires planning, awareness and good advice.
“Business needs rarely fit neatly into one funding product. The key is to match each part of the strategy with the right tool: that’s where blended funding can unlock real value.”
Richard Olsen, Director, Pegasus Funding Solutions
What Is Blended Funding?
Blended funding refers to the use of two or more funding sources in a coordinated strategy. Rather than relying on a single facility, businesses assemble a package of complementary finance options tailored to their needs.
For example:
- A manufacturer could combine a long-term bank loan with asset finance to purchase new equipment
- A tech company might mix private equity, revenue-based finance and stock finance to support rapid growth
- A seasonal business may use a revolving credit line alongside short-term unsecured lending to cover cashflow gaps.
Each funding type plays a different role. Blending them creates a more tailored, strategic outcome.
Why Is Blended Funding on the Rise?
There are several drivers behind the increase in blended finance strategies among UK SMEs:
- Complex Growth Needs
Modern businesses often grow in several directions at once: expanding teams, entering new markets, launching products, or acquiring assets. No single lender is likely to cover all of these.
Blending allows different funding sources to support different aspects of a growth plan.
- Market Volatility
In an environment where input costs, interest rates and customer demand can all fluctuate, flexibility is essential. A blended approach allows businesses to avoid over-reliance on one lender and to build in contingency.
Another structural trend is more participation from international investors in funding rounds, which can influence terms and expectations: 68% of UK startup rounds in 2024 had overseas investor involvement. For expansion-stage companies, this often means large US venture or PE funds coming in with bigger cheques, potentially accelerating growth plans beyond what domestic capital alone might do. UK businesses are generally open to this, but it comes with the need to meet perhaps more demanding growth targets.
- Faster Decision-Making
By engaging with multiple providers, including alternative lenders and fintech platforms, SMEs can secure the funding they need more quickly and on terms that suit their cashflow profile.
Types of Finance Commonly Blended
Blended funding structures typically draw from multiple finance types. Common combinations include:
- Bank loans: Ideal for longer-term investments, such as property or major equipment
- Asset finance: Used to spread the cost of vehicles, machinery or technology
- Invoice finance: Releases working capital tied up in unpaid invoices
- Private equity or director investment: Offers cash injection without immediate repayment demands
- Alternative lending: Provides flexible, fast access to cash when opportunities or gaps arise.
The mix will vary depending on the business’s size, sector, risk appetite and growth goals.
The Strategic Benefits of a Blended Approach
Cost Efficiency: Using the most cost-effective type of finance for each purpose helps reduce the overall cost of capital. For instance, using invoice finance to support working capital is usually more efficient than using long-term debt.
Risk Management: Spreading funding across multiple sources reduces reliance on any one lender. It also means the business is less exposed to the risk of covenant breach or changes in a single provider’s appetite.Too much debt can strain a business if sales dip (especially with interest rates high), so this approach allows owners to maintain a balanced capital structure.
Improved Cashflow: Matching repayments to income flows ensures that funding doesn’t strain the business. For example, revenue-based loans flex with performance, while asset finance aligns repayments with usage.In some large growth deals in 2024, debt actually outstripped equity in size (the largest European deal was a €4.59bn green loan to Northvolt, a battery maker). This shows companies taking advantage of cheaper debt when available to preserve equity.
Negotiating Power: By diversifying funding relationships, businesses avoid becoming tied to the terms of a single institution. This can improve their position when negotiating new finance or restructuring existing facilities.
Common Pitfalls to Avoid
While the benefits are clear, blended funding requires careful management. Challenges can include:
- Complexity: Managing multiple providers, terms and repayment schedules can be administratively demanding.
- Covenant clashes: Some lenders may impose terms that conflict with others. For example, restrictions on additional borrowing.
- Lack of visibility: Without a clear picture of the overall funding structure, businesses can over-extend or miss opportunities.
This is why expert support is critical. A funding advisor can coordinate providers, ensure compatibility and build a structure that grows with the business.
“Blended funding needs a joined-up view. It’s not just about stacking products. It’s about sequencing them properly, negotiating terms that work together, and making sure the funding supports, rather than constrains, the business.”
Richard Olsen, Director, Pegasus Funding Solutions
When Is Blended Funding Most Valuable?
We regularly recommend blended strategies in the following scenarios:
- Acquisitions: Where part of the deal is funded by debt, part by equity, and part by vendor finance or asset refinance
- Rapid scaling: Where cash is needed up-front to fund growth before revenues catch up
- Seasonal trading: Where recurring gaps in cashflow can be managed using flexible finance layered with core facilities
- Recovery and restructure: Where refinancing multiple legacy debts into a more sustainable structure is necessary.
In each case, the goal is the same: build a funding platform that enables strategic action and strengthens the company’s financial resilience.
A Note on Funding Culture
There remains a tendency among SMEs to assume there is a single ‘correct’ funding path. In reality, businesses have more options than ever before, but unlocking them requires proactivity and a willingness to look beyond the traditional.
In some cases, this means using private investors alongside bank lending. In others, it means layering a short-term facility on top of a long-term credit line. The right structure will vary, but the process always starts with understanding what the business is trying to achieve.
Final Thoughts: Funding That Supports the Business, Not the Other Way Around
Blended funding is about building a finance structure around your business plan, not bending the business to fit what a single lender will offer. It requires joined-up thinking, awareness of the full market, and the ability to negotiate terms that align with both ambition and risk appetite.
At Pegasus Funding Solutions, we help SMEs across the UK create blended funding strategies that drive growth, protect equity and support long-term stability.
If you’re facing a funding decision, we can help you understand your full range of options and build a solution that truly works for your business.
Call: 0203 327 0567
Email: [email protected]