Current economic conditions are making funding difficult for SMEs. Four experts on the following pages explore how SMEs can thrive in these conditions, starting with Robert Tinterov, CEO and Founder, PriceAgent:
With rising interest rates and tighter lending standards, access to capital is becoming more selective – and more demanding. For SMEs, that means it’s no longer enough to show promise; you need hard evidence of customer value and pricing strength.
That’s where knowing your customers’ exact ‘willingness to pay’ becomes a critical advantage. Few business owners speak – nor indeed understand – the language of pricing. Yet it’s critical to have at your fingertips precise, data-driven pricing insights that de-risk decision-making and support stronger funding narratives. The era of slow, high-ticket consulting projects is over – businesses today need actionable insights in days, not months. When you can clearly demonstrate that your product is valued and priced right, you not only optimise revenue but also build investor confidence. In this environment, speed, clarity and customer validation are the new currency.
From my own experience, especially in today’s climate, it’s also clear that start-ups need to focus more on revenue and actual sales than just user growth or vague market traction. Real numbers count more than ever – not just in volume, but in clarity around customer value. It’s no longer enough to say people are using your product; you need to show that they’re willing to pay for it – and how much.
Investors, in my opinion, typically only invest in businesses they truly understand. That means your pitch needs to be grounded in real customer demand, not just projections. If you can show not only that customers want what you’re offering but exactly what they’re willing to pay per unit or sale, you’re far more likely to get the backing you need. It’s about turning assumptions into data and potential into proven value.
Whether you seek crowdfunding, venture capital, angel investing, peer-to-peer lending or even Blockchain-based fundraising, it’s important to demonstrate competitive advantage. Results-based financing mechanisms, outcomes-based contracts or results-based loans may also be a possibility. But with all of these, you must know the value of your product or service – and who is willing to pay for it. Too many companies still rely on backward-looking POS data to guide pricing decisions. Yet investors will want to know you can respond to market conditions fast and with confidence. When it comes to launching new products, especially in tech or seasonal categories, pricing mistakes can ruin your economics before you begin. The old model of setting prices based on historical sales or competitor benchmarks is no longer enough. From pandemic-era shifts to the latest tariff battles, global disruptions are now a permanent feature of the business landscape.
Ninety-five percent of start-ups fail, and this is because many never properly test their product, audience nor price. Well-funded start-ups waste millions because they failed to ensure adequate upfront intelligence. Early-stage companies must validate their market fit and be able to answer the questions: Who is the customer? What features matter most to them? And how much are people willing to pay? Knowing this ensures resilience even in a crowded market. There’s no excuse for companies that have failed to do their homework.
Jason Tassie, B2B Growth Strategy Expert and Founder, Know Your Business
There’s no question that rising interest rates and tighter lending criteria are making it harder for UK SMEs to access traditional finance. High street banks seem to be more selective than ever, especially when it comes to newer businesses or those in sectors perceived as volatile. That’s led to a noticeable funding gap, particularly for start-ups and early-stage firms that lack trading history or tangible assets to secure a loan. Where once a solid business plan might have been enough, SMEs are now being asked to provide extensive financial forecasts, personal guarantees and collateral and even then, the answer may still be no.
This environment has forced many SMEs to look beyond traditional bank loans, and in doing so, we’re seeing some genuinely innovative funding models step into the spotlight.
Revenue-based financing is gaining traction, especially for digital-first or service-based companies with recurring income. Rather than fixed repayments, this model ties repayment to a percentage of monthly revenue, offering flexibility that aligns with business performance. It’s not cheap, but it’s often more accessible and doesn’t require security.
We’re also seeing a rise in peer-to-peer lending platforms and alternative credit providers that use open banking data and real-time business performance metrics to assess creditworthiness. These FinTech lenders are more agile and tech-driven, allowing them to offer decisions in hours rather than weeks. And for businesses with strong communities or B2C propositions, crowdfunding continues to be a powerful tool, not just for raising capital, but also for validating market demand and building brand loyalty.
Asset-based lending is also playing a growing role, with more companies unlocking funding tied to unpaid invoices, equipment or even stock. It’s a lifeline for firms in cashflow-sensitive industries like manufacturing or logistics, where payment terms can stretch for months.
While we saw government-backed schemes like the British Business Bank’s Recovery Loan Scheme help soften the blow, as those schemes were phased out, the onus has increasingly been on SMEs to shop around, understand the full cost of credit and explore non-traditional options. It is however worth keeping an eye on replacement schemes and grants, for example, The Growth Guarantee Scheme managed by the British Business Bank which might not be as well-known as its predecessor.
The key takeaway is this: while the funding landscape has undoubtedly become more challenging, it’s also more diverse than ever. The businesses that thrive will be those that adapt, combining financial resilience with a willingness to embrace new forms of funding that better match today’s economic realities.
Chris Mears, South West Regional Head, Growth Lending
Access to funding is becoming harder for SMEs, not because of a lack of lenders, but due to a fragmented and difficult-to-navigate market. While interest rates are starting to ease, they remain high enough to affect borrowing, especially for those still carrying post-COVID debt. At the same time, rising National Insurance Contributions and the National Minimum Wage are pushing up costs. With consumer spending still subdued, many businesses are missing revenue targets, increasing pressure on margins and covenant compliance. In response, lenders are scrutinising downside risks more closely. SMEs that can demonstrate agility and financial resilience are standing out.
Despite more funders in the market, access hasn’t become easier. The sheer volume of choice makes it harder. Many lenders are shifting their credit criteria as they become more specialised, meaning matching the right funder to the right business is time-consuming. The original approach of relying on one or two banks is no longer effective.
This makes intermediaries more important. Debt advisors and brokers now play a central role in helping SMEs navigate the funding market. With the right support, businesses can properly structure applications, target suitable lenders and negotiate favourable terms.
Lenders are also becoming more selective. There’s a clear preference for well-prepared businesses with solid models and strong market positions. These SMEs often attract multiple offers, whilst others may struggle to access support if they fall short. Strong preparation and clarity are now critical.
That said, new lending models are emerging. Some lenders are moving away from historical profits, instead focusing on projected revenues, particularly helpful for SMEs that have reinvested in growth. Others are offering bullet repayments, aligning repayments with future cash flow. These innovations are reshaping the market.
Government-backed schemes are also stepping up. The British Business Bank has launched regional funds, while new financing is being directed at defence and specialist healthcare. Pension funds are being encouraged to invest in UK SMEs, helping to fill the gap left by traditional banks.
Succession planning is back on the agenda. Owners are becoming more realistic about valuations and open to flexible deal structures. Funders are responding positively, particularly where plans are well thought out.
In today’s market, SMEs need to be strategic. Funding is available, but access depends on preparation, positioning and finding the right partner. Don’t go it alone – get advice, tell your story clearly and engage lenders that fit your business.
Miriam Koreen, Head of SME and Entrepreneurship Finance Unit, OECD CFE
In recent years, SMEs and entrepreneurs have faced a series of challenges, from pandemic shutdowns to cost inflation and historic rises in interest rates.
OECD data from close to 50 countries worldwide show that in 2023 alone, SME interest rates rose by 6%, accompanied by higher borrowing costs and stricter collateral requirements.
As a result, bank lending to SMEs fell by 9%, a drop not seen since the Great Financial Crisis. Other forms of finance also fell, including asset-based finance and venture capital investments – down 34% in 2023.
Amid growing uncertainty around the business and financing environment, how can SMEs access the resources they need to invest and grow?
The answer lies in better leveraging existing financing tools – and embracing new ones. From targeted public investment to sustainable finance and FinTech innovation, opportunities exist to reverse this downward trend.
Venture capital, which has expanded eight-fold over the last 15 years, remains out of reach for most SMEs. New government backed funds are targeting specific SME segments, such as women-owned businesses or GreenTech or DeepTech firms.
Governments have also been working to boost business awareness and skills to help SMEs attract investors – an approach that is key to the UK’s Clean Growth Fund, France’s FrenchTech 2030 and the European Innovation Council Accelerator.
Sustainable finance is another fast-growing source of capital. Global sustainable debt reached US$800 billion in the first half of 2024 alone; yet SMEs are often unaware – or unable – to access this finance. A key barrier is sustainability reporting.
Efforts are underway to streamline requirements and foster convergence across SME reporting frameworks. The OECD Platform on Financing SMEs for Sustainability is contributing to this by developing guidance for SME sustainability reporting to financial institutions.
Financial technologies offer an additional option to strengthen flows of finance to SMEs. FinTech tools can make the loan application process more intuitive and provide faster, more accurate assessments of credit risk for smaller firms, provided safeguards are in place to avoid bias and protect data.
New platforms also allow payments, lending, insurance and other financial products to be embedded into apps and online tools – referred to as embedded finance for SMEs. Supply chain finance is also leveraging digital innovations, including digital infrastructure for payments and e-invoicing and big data and AI for analytics.
To seize these opportunities, SMEs need not only access, but knowledge of and trust in these solutions. There are a range of initiatives to boost financial and digital skills. In Singapore, the SME Go Digital programme is just one example of using digital solutions to bridge digital skills gaps while offering financial support for AI adoption and tools for e-invoicing.
Despite current roadblocks, if we create the conditions for SMEs to better tap into existing and emerging financing instruments, they can continue to invest, grow and forge a path towards resilience and sustainability.
