Bridging the SME Funding Gap: How to Improve Access to Business Finance
Access to funding, whether through loans, overdrafts, or credit facilities, is vital for the growth and success of small and medium-sized enterprises (SMEs). However, new research from Allica Bank has highlighted a growing challenge: a funding gap of up to £65 billion across the UK SME sector, which risks stifling future growth.
Allica’s findings serve as a timely warning for business owners. The landscape for SME finance is shifting, and securing the funding needed to invest and expand is becoming more difficult.
Key findings from the research
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A significant generational decline in SME bank lending has emerged, with a £65 billion gap in lending to small and medium-sized businesses over the past 25 years. Critically, this shortfall is most evident in productive credit, the kind of funding that drives investment, innovation, and growth.
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Overdraft facilities for small businesses have declined sharply, from £18 billion in 2000 to just £2.7 billion in 2024.
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The UK now has the lowest rate of business investment in the G7. Small businesses invest at just one-third of the level of large corporates, and the UK also records the lowest SME loan application rates among OECD countries.
Why does this matter?
A nationwide funding gap affects businesses of all sizes, not just large corporates. Ready access to affordable finance is the lifeblood of a growing business. It supports your cash flow, underpins your investment in staff and equipment, and provides the financial resilience needed to navigate economic uncertainty.
If loans, overdrafts, and other credit options become harder to secure, many SMEs will find it difficult to fund their next phase of growth or even to maintain day-to-day operations.
Four practical ways to improve your access to funding
Despite the challenges, there are proactive steps you can take to improve your business’s funding prospects. Here are four key strategies:
1. Strengthen your business credit profile
A solid credit score reassures lenders that your business is reliable and creditworthy. Pay suppliers on time, minimise your credit utilisation ratio, and maintain accurate financial records. A strong credit profile can significantly improve your chances of securing funding.
2. Look beyond traditional banks
Many SMEs are turning to alternative lenders and fintech platforms for more flexible and faster funding solutions. Options such as asset finance and invoice finance can provide much-needed liquidity without the rigid criteria of high street banks.
3. Make use of government-backed schemes
The government’s Growth Guarantee Scheme offers eligible businesses loans of up to £2 million. Open to SMEs with a group turnover of up to £45 million, this scheme is an excellent option to explore if you are looking to raise capital.
4. Present a compelling business plan
A well-prepared business plan and robust financial projections can greatly enhance your credibility with potential lenders. Demonstrating a clear growth strategy and your ability to meet loan repayments will set you apart in a competitive lending environment.
How we can help
If you are concerned about accessing the funding needed to grow your business, we are here to help. We can work with you to strengthen your credit profile, improve your funding applications, and explore suitable finance options.
Talk to us today about funding the future of your business.
