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In 2025, many small and medium-sized businesses (SMEs) across the UK are aiming for growth.
They’re ready to hire more staff, expand into new markets, and invest in better tools or systems.
However, for many of them, one significant challenge stands in the way: gaining access to the right funding at the right time. This article is intended for lenders, such as banks, fintechs, and financial platforms, who want to support these growing businesses.
We’ll explain the real challenges of SME lending today and demonstrate how utilising smarter data and technology can help address them.
Why SME Lending Is Still So Difficult
Why SME Lending Is Still So Difficult
Even though there’s a lot of demand, lending to SMEs isn’t easy. Financial institutions face several challenges when attempting to offer business loans to small businesses. Here are the most significant issues:
1. It’s hard to find trustworthy information
1. It’s hard to find trustworthy information
Lenders require reliable information about a business, including its finances, directors, background, and other relevant details. But for many SMEs, this information is either outdated, incomplete, or missing entirely.
2. SMEs seem risky
2. SMEs seem risky
Without complete information, lenders often see SMEs as high-risk borrowers. This makes them hesitate to offer loans, even when the businesses are doing well.
3. It’s expensive to process SME loans
3. It’s expensive to process SME loans
Traditional loan processes involve a significant amount of manual work, including verifying documents, conducting background checks, and other tasks. For small loans, the cost of processing often outweighs the benefit.
4. There are lots of rules and regulations
4. There are lots of rules and regulations
Lenders have to follow strict rules to prevent fraud and money laundering. These checks take time and slow down the lending process.
5. Many SMEs don’t have a strong credit history
5. Many SMEs don’t have a strong credit history
Unlike large businesses, some SMEs don’t have a long track record. This makes it difficult to judge whether they’re reliable or not.
6. Some SMEs don’t even know they’re ready for funding
6. Some SMEs don’t even know they’re ready for funding
Sometimes, the SMEs themselves are not prepared; they may not know how to apply, or may not realise they’re eligible for a loan.
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