Access to Funding and Credit

For many small business owners, getting access to funding feels like trying to squeeze water from a stone. Traditional banks have always been a bit cautious when it comes to lending to smaller enterprises, but over the past few years, it’s become even tougher. With the economic uncertainty lingering after Brexit, COVID-19, and a volatile global market, lenders are now scrutinising applications more closely than ever.

Many businesses face a chicken-and-egg situation. They need funding to grow, but without strong turnover or solid security (like property), banks are reluctant to say yes. Even successful businesses often find they don't meet the banks' ‘tick box’ criteria, especially if they are newer or operate in sectors seen as high risk.

Alternative finance options have grown significantly. Crowdfunding platforms, peer-to-peer lending, and invoice financing are now on the table for small businesses. There are even government-backed schemes, like the British Business Bank's programmes, which can help. But many business owners are unsure about how these work or are wary of taking on unfamiliar debt.

Another challenge is the cost. Interest rates have risen sharply, meaning borrowing is far more expensive than it was just a couple of years ago. What might have been a manageable loan repayment in 2020 could now be uncomfortably high.

Grants do exist, but they are often highly competitive, sector-specific, or tied to innovation and sustainability projects. Day-to-day businesses just trying to expand their premises, hire staff, or invest in new equipment can feel left out.

Navigating the funding landscape requires time, research, and often professional advice. Some businesses are turning to financial brokers to find the best options, but this comes with its own costs and risks. Others are choosing to grow slowly, using retained profits rather than borrowing at all.

At the end of the day, access to funding remains a major barrier to scaling up for many UK small businesses. Without new sources of finance, many will simply tread water instead of reaching their potential.