UK Releases Findings from Small Business Finance Review

The UK Government has published its official response following a review into small business access to finance, conducted by the Department for Business and Trade between March and May 2025.

The government initially launched the consultation in March.

This consultation gathered input from a broad spectrum of organisations and individuals involved in business and finance, aiming to evaluate the adequacy of current policies and identify areas for improvement.

The call for evidence centred on four main areas: obstacles to the demand for debt finance, developments within the lending market, alternative financing models, and the experiences of underserved entrepreneurs.

Primarily, organisations representing businesses, as well as lenders, described a general “lack of awareness” about financing choices, with micro-businesses and underrepresented groups such as women founders facing pronounced challenges.

Respondents indicated that additional financial training, particularly around credit building, could better prepare businesses to secure funding.

The recently introduced Business Growth Service (BGS) was noted as a possible tool to address information gaps, provided it is supported by measures to raise awareness among business owners.

Secondly, stakeholders observed more cautious lending behaviour since the financial downturn, including “stricter” checks on borrowers’ ability to repay.

While some felt that banks still support “viable businesses”, others argued that newer or smaller enterprises often struggle due to lending criteria that favour larger loans and require physical assets as collateral.

Suggestions included developing lending products tailored to today’s business landscape, “simplifying” processes for setting up accounts and applying for loans, and exploring alternative forms of finance such as revenue-based or blended models.

Some respondents pointed out that lending against intangible assets such as intellectual property (IP) remains uncommon in mainstream finance because of difficulties in assessing their value.

Regulatory requirements such as Know Your Customer (KYC) checks were also highlighted as costly and time-consuming for smaller firms seeking finance.

Over the next five years, the government aims to deliver at least 85,000 startup loans, increase annual lending by a third, extend eligibility to businesses up to five years old, and raise the average loan amount to reflect higher startup costs.

Thirdly, input was sought on alternative approaches to finance, including regional mutual banks and support for community-based lenders.

Some respondents also noted that automated lending systems may overlook the real potential of otherwise viable small businesses.

Government interventions in support of Community Development Finance Institutions were seen positively, with requests for continued measures such as tax relief schemes and capital investment programmes.

Lastly, the review heard that women-led businesses, ethnic minority entrepreneurs, disabled people, and those operating in less affluent areas encounter persistent obstacles in obtaining funding.

Many are discouraged by concerns over personal liability or unclear loan terms; some prefer grants or smaller flexible loans over traditional debt.

Suggestions included expanding data collection on business owner demographics to improve understanding of disparities and designing targeted interventions.

“UK publishes small business finance review findings” was originally created and published by Leasing Life, a GlobalData owned brand.

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