Government seeks input on SME access to finance

The UK Government has launched an open call for evidence on small business access to finance. This initiative aims to reshape the lending market and ensure that SMEs have the financial resources they need to thrive and innovate.

With the industrial strategy set for release in June and the small business strategy expected later in 2025, the government is prioritising financial support for 5.5 million small businesses across the UK. Access to external finance is vital for SMEs, enabling them to invest, expand, and establish new enterprises. However, despite efforts to diversify finance options, both businesses and lenders continue to report challenges in accessing debt finance, including stringent lending criteria, personal guarantee requirements, and disparities in approval rates among different business demographics.

Emma Lovell, Chief Executive of the Lending Standards Board (LSB), emphasised the need for a balanced approach to SME lending:

“SMEs are the backbone of the UK economy, and it’s vital these businesses have reliable access to the finance they need to grow and thrive. But it’s important there’s a balance between the ability to access finance quickly and being able to do so safely. The LSB’s Standards of Lending Practice for business customers – the only independent lending protections for many UK SMEs – have a key role to play here and help support innovation and growth within the financial services sector while mitigating risks SMEs might otherwise face.”

The government is inviting input from small businesses, banks, non-bank lenders, and industry experts to assess how existing policies support businesses and lenders; identify opportunities to enhance SME growth through better finance access; and understand the barriers to finance from the perspective of market participants.

Gareth Thomas MP, Parliamentary Under Secretary of State (Minister for Services, Small Businesses and Exports), and Emma Reynolds MP, Economic Secretary, are urging stakeholders to contribute, emphasising that market insights are essential in shaping policies that foster a pro-business environment.

The call for evidence will focus on key topics, including:

The lending market – assessing competition, accessibility, and affordability.
Demand for finance – exploring why UK SMEs use less debt finance than international counterparts.
Application and approval processes – identifying inefficiencies and areas for improvement.
Alternative finance models – examining innovative SME financing options.
Support for under-served businesses – ensuring equitable access to finance.

Small businesses are the foundation of the UK economy, driving GDP growth, employment, and innovation. However, many SMEs struggle to secure appropriate finance, limiting their potential. Creating an efficient, accessible lending environment is crucial for unlocking the UK’s economic potential.

To support SMEs, the government already collaborates with organisations such as the British Business Bank, Growth Hubs, Help to Grow: Management, and Innovate UK.

Neil Rudge, Chief Banking Officer for Commercial at Shawbrook, commented: “SME lending in the UK has long been constrained by a one-size-fits-all approach from large lenders, leaving many viable businesses underserved.

“The reality is that SME finance is far more complex than consumer lending and you need to invest in and really understand this to offer suitable lending products to these vital businesses.

“While lenders can innovate and collaborate, the real opportunity for change lies at the macro level. It is incumbent on the government to raise awareness of specialist lenders as the first point of call for SMEs, helping to create an environment where businesses can access the right finance at the right time. Additionally, government can help by taking action to stimulate growth, reduce cost burdens on SMEs, and ensure that funding and capital regimes for specialist lenders are structured to support rather than restrict lending growth. Without intervention, the funding gap for SMEs will persist—hindering innovation, investment, and economic recovery,” noted Rudge.

The government is encouraging businesses, lenders, and industry bodies to share data, experiences, and ideas to help shape a stronger, more inclusive SME finance landscape. By addressing key challenges, this initiative will ensure that SMEs have the right financial tools to succeed. The call for evidence will remain open for eight weeks, closing on 8 May.

For more details, visit the official call for evidence page: UK Government SME Finance Consultation.