New tech could unlock £5bn a year in SME credit

Small and medium-sized businesses in the UK are missing out on an estimated £5 billion in potential credit each year due to easily fixable issues in their corporate credit profiles, according to new research from FXE Technologies, published as the Government launches a review into SME lending.

The findings form part of an industry initiative led by the Centre for Finance, Innovation & Technology (CFIT), which is examining how digital “fundability” tools could improve access to finance. One such tool – FXE’s prototype Funding Health Checker – shows SMEs how lenders assess their applications using data from credit reference agencies, Companies House and other sources, and recommends specific steps to improve creditworthiness.

FXE analysed the credit profiles of 24,000 businesses declined for loans since 2019 and found that around 65% had “readily fixable” issues such as repeated overdraft usage, late filing of accounts, missed supplier payments and negative asset positions. Many company directors did not realise these behaviours would prevent them accessing finance. If replicated across the UK’s SME population, FXE says the missed credit opportunity exceeds £5bn annually.

A pilot of the Funding Health Checker showed promising results:

80% of SMEs said it significantly improved their understanding of fundability
85% intended to take corrective action
90% would recommend the tool to peers

The CFIT-led coalition – supported by Mastercard, Lloyds Banking Group and HSBC UK – is developing the technology to give SMEs the kind of real-time, personalised insights long available to consumers applying for mortgages or personal loans.

These developments come as the Government opens a review of the Mandatory Bank Referrals scheme, introduced in 2015 to direct businesses rejected by banks to alternative lenders. Despite these intentions, 94% of SMEs referred on are rejected again, contributing to what the coalition describes as a culture of “permanent non-borrowers,” with half of UK business owners no longer seeking finance. The consultation follows recommendations made by CFIT’s SME Finance Taskforce to reform both the referrals system and commercial credit data-sharing rules.

Katrin Herrling, CEO and co-founder of FXE Technologies, said: “Our research shows that half of businesses turned down by banks could access funding if they had the right guidance.

“The review of the Mandatory Bank Referrals scheme is the moment to address this. Funding Health Checker gives business owners the clarity and tools they need to turn rejection into opportunity.”

Rob Haslingden, Head of Impact Assessment and Engagement at CFIT, added:

“By educating SMEs about their financial data, and providing these insights either prior to or at the point of credit application, we can help millions of businesses take the necessary remedial action to improve their creditworthiness, emulating how similar services in consumer credit have transformed access to mortgages and personal loans.”

Industry partners echoed the potential impact. Mark Barnett, Global Head of SMEs at Mastercard, said the initiative would help reduce the funding gap by improving transparency around credit decisions.

Chris Loring, Managing Director, Head of Commercial Lending and Working Capital at Lloyds Banking Group, said the coalition’s work “demonstrated how data can be used to help businesses be prepared and ready to access lending.”

Tom Wood, Head of Business Banking at HSBC UK, said the platform aligned with the bank’s mission to make financing “more transparent and accessible” for small firms.

The coalition will continue testing the prototype as part of ongoing efforts to improve digital adoption and broaden SME access to finance under the Government’s wider Plan for Small and Medium Sized Businesses.