SMEs drive the UK economy, but many still face barriers to essential financial services. Closing the gap requires more than lending—it needs infrastructure.
Small and medium-sized enterprises (SMEs) are the bedrock of the UK economy. Representing 99.9% of the business population, they account for over 60% of employment and generate over £2.1 trillion in annual turnover (BEIS, 2022). Yet despite this, many face barriers to fast, flexible, and efficient financial services.
Often, talk around SME finance centres on access to loans. But the gap is much broader. As we’ll explain, it often seems like many of the services taken for granted by bigger businesses are just not there for SMEs.
Basic access to payment systems, digital tools, and infrastructure that underpin daily operations and long-term growth are often out of reach. These are things that SMEs need every single day.
For many SMEs, the problem isn’t just funding—it’s functionality. Large businesses take for granted access to merchant accounts, real-time settlements, and cross-border payments. SMEs, by contrast, often deal with complex onboarding, long waiting periods, and a lack of tailored services.
Legacy infrastructure, strict compliance processes, and one-size-fits-all products have created friction where flexibility is needed. Meanwhile, newer SMEs—especially startups or sole traders—are frequently excluded by rigid eligibility criteria.
While lending remains a barrier, financial enablement, such as instant onboarding, merchant services, and access to global payments, is equally important for business continuity and growth.
A modern payments ecosystem is central to SME success. Key components include:
These aren’t luxuries—they are operational essentials. When SMEs can access these services without delay or friction, they are better positioned to grow sustainably.
Traditional financial institutions still play an important role, but many SMEs struggle to meet their criteria. Common issues include:
In 2023, more than 140,000 UK business accounts were closed by major banks (UK Treasury Committee), many without a clear explanation. These disruptions cut off SMES from essential services, creating real operational and reputational risk.
While bank loans, invoice financing, and asset finance remain important, access remains uneven, especially for businesses with limited credit history or insufficient collateral. Government initiatives like the British Business Bank’s programmes and the Bank Referral Scheme aim to improve outcomes, but uptake is inconsistent.
Alternative finance options and commercial credit data sharing initiatives can help modernise credit evaluation, but awareness among SMEs remains low.
Asset finance enables SMEs to acquire essential equipment, vehicles, or property without upfront capital. Leasing, hire purchase, and asset-backed loans can unlock investment and boost productivity. However, smaller firms often struggle to qualify due to tight underwriting standards.
The UK government’s support for asset finance, including through the British Business Bank, has been a positive step, but access is still largely skewed toward larger or more established SMEs.
Fintech platforms are filling in the gaps by offering agile, API-driven services, which empower SMEs through:
For startups and digitally native businesses, fintech services are often better aligned with operational realities. Modular infrastructure offers flexibility and integration that traditional banking systems can’t match.
Real progress depends on cooperation between regulators, banks, fintechs, and industry bodies. Efforts from the British Business Bank, the SME Finance Charter, and The Payments Association show how policy and industry can align to support SMEs.
Initiatives targeting underserved groups, such as women-led businesses or those outside the South East, will ensure that financial access supports broad-based economic growth.
SMEs aren’t just borrowers—they’re innovators, exporters, and employers. To thrive, they need infrastructure that supports how they operate, transact, and grow.
Bridging the SME finance gap requires more than loans. It demands a modern, inclusive financial architecture built around the real needs of small businesses. From real-time payments to secure cross-border processing, the right infrastructure doesn’t just power transactions—it powers progress.
By modernising how we serve SMEs, we strengthen not just individual businesses, but the resilience and dynamism of the UK economy as a whole.
The Payments Association
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