# What stops small firms getting sustainability-linked loans, according to the Loan Market Association (LMA) survey behind its 2026 practice note?

Canonical: https://senseible.earth/answers/what-stops-small-firms-getting-sustainability-linked-loans

The LMA's first-quarter 2026 survey, answered by 30 organisations, lists challenges, 23 by our count, across the five parts of a sustainability-linked loan. They run from missing baseline data and no standard benchmarks for small firms to structuring costs and verification that feels too expensive for the loan size.

## Where the list comes from

The practice note says the challenges were identified in the LMA's Q1 2026 market survey, to which 30 individual organisations responded. It groups them under the five core components of the Sustainability-Linked Loan Principles (SLLP), for small and medium-sized enterprises (SMEs). The list below follows the note's own wording closely; I have counted the items myself. The note gives no percentages for how many respondents named each one.

## Choosing the key performance indicator (KPI): six challenges

- May not have developed an in-depth sustainability strategy yet.
- Limited data, weak data systems and no baseline metrics.
- Difficulty identifying material, sector-relevant and quantifiable KPIs.
- Early-stage firms find quantitative indicators hard to define and lean on qualitative commitments.
- No standard, SME-tailored KPI frameworks, with sector-agnostic approaches often unsuitable.
- Limited in-house expertise and capacity.

## Setting the sustainability performance target (SPT): six challenges

- Short-term competitive pressure competes with long-term goals.
- No leverage over suppliers and clients because of size.
- No standard benchmarks for SME-level ambition.
- No three years of history to build a baseline and show a target beats business as usual.
- Targets that do not fit the firm's finances, for example capex-heavy targets for a firm focused on operating costs, or its strategy, for example growth by acquisition.
- Doubt over whether ambitious decarbonisation paths are economically viable.

## Loan terms, reporting and verification: eleven challenges

- Loan terms (4): high legal, advisory, structuring and internal time costs for a small loan; little room to absorb them in the lending margin; sleeping loans and rendez-vous clauses adding complexity and cost; simplified bespoke facility letters that limit standardisation and comparison.
- Reporting (3): limited reporting systems and automation; limited time, staff, expertise and environmental, social and governance (ESG) ownership; a heavy reporting burden for the firm's size.
- Verification (4): seen as disproportionately costly for the loan size; extra auditor and verifier costs with limited perceived value; no standard verification approach for SMEs; more compliance and administration.

## What a borrower can fix before asking

My reading: some items sit with the lender, such as structuring cost and benchmarks. Others sit with the borrower: a year of fuel and electricity records, one or two operational indicators, and a named person who owns the numbers. Having those ready answers the data, baseline and reporting items on the list. The practice note's own response to these challenges is covered on the page linked below.

## Example: recount the challenges

- Indicator 6 + target 6 + loan terms 4 + reporting 3 + verification 4 = 23 challenges
- Items a borrower's own records could help with, by my reading: baseline data (1), quantifiable indicators (1), 3-year history (1), reporting systems (1) = 4 of 23

Counts are mine, from the note's lists. The survey's own response numbers per item are not published in the note.

## What Senseible does here

Senseible reads fuel invoices and electricity bills into monthly records, so fuel and electricity use can be looked up by month. It does not lend, set targets or verify a loan indicator.

- [What the LMA practice note says for SMEs](https://senseible.earth/answers/sustainability-linked-loan-sme-practice-note)
- [KPIs that work for an MSME](https://senseible.earth/answers/sustainability-linked-loan-kpi-examples)
- [What a verifier checks on a loan KPI](https://senseible.earth/answers/sll-kpi-verification-what-verifier-checks)
- [Green loan readiness check](https://senseible.earth/green-loan-check)

Sources: [LMA, Practice note on the application of the Sustainability-Linked Loan Principles to SMEs, September 2026](https://www.lma.eu.com/application/files/7117/9006/5478/LMA_Practice_Note_on_the_application_of_the_SLLP_to_SMEs_-_22_September_2026.pdf)

Last reviewed 2026-11-05. The survey report itself, Scaling Sustainable Finance for SMEs, was not read; this page uses the note's summary of it. Re-check the LMA site for updates.