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
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
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 But for many SMEs, this information is either outdated, incomplete, or missing entirely.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
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
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
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
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
Sometimes, the SMEs themselves are not prepared; they may not know how to apply, or may not realise they’re eligible for a loan.
How Financial Institutions Must Respond to SME Lending Needs
The good news is that financial institutions don’t have to figure this out alone. By utilising the right technology, they can respond more quickly, mitigate risk, and serve small and medium-sized enterprises (SMEs) more effectively.
This is where data intelligence platforms, such as DataGardener, come into play. Let’s break it down.
How Data Can Solve Key SME Lending Challenges
Lenders need to reimagine their approach to SME lending by leveraging enriched business intelligence and alternative data sources. Here’s how technology and data can address each of the key barriers:
Challenge 1: Lack of Reliable Information
Many SMEs lack up-to-date or comprehensive financial disclosures. Traditional credit scoring is often insufficient.
Solution: DataGardener helps lenders by offering verified, up-to-date information on millions of UK businesses. This includes company filings, director details, credit scores, charge histories, and more, all in one place.
This means lenders don’t need to guess or manually dig for data. Everything is laid out clearly, allowing for faster and more confident decisions.
Challenge 2: High Risk
Without a clear picture of financial health, SMEs are often categorised as high-risk by default.
Solution: Lenders can utilise DataGardener’s predictive insights to assess a business’s risk profile accurately. It includes financial health checks, recent activity, payment history, and even potential red flags.
This makes it easier to differentiate between high-risk and low-risk SMEs, allowing for fairer and more personalised lending decisions.
Challenge 3: Unattractive Costs
Manual underwriting processes, high acquisition costs, and fraud risk make small and medium-sized enterprise (SME) lending expensive.
Solution: Manually reviewing hundreds of SMEs can take hours. With DataGardener, lenders can automate the due diligence process, allowing them to focus solely on qualified leads.
This reduces the time and cost involved in processing SME loans, making smaller loans more viable and accessible.
Challenge 4: Regulatory Constraints
Compliance with anti-money laundering (AML), Know Your Customer (KYC), and credit regulations can create friction in the lending process.
Solution: DataGardener helps lenders streamline regulatory checks by offering automated KYC and AML screening, as well as the latest time monitoring, thereby accelerating onboarding without compromising security.
Challenge 5: Lack of Credit History
Many SMEs are too young or too lean to have developed a robust credit history.
Solution: Even if an SME doesn’t have a deep credit history, DataGardener pulls together other indicators like satisfied charges, consistent filings, or healthy revenue growth to help build a more complete credit profile.
This provides lenders with a more accurate view of a business’s potential, not just its past performance.
Challenge 6: SMEs Themselves Can Be a Roadblock
Not all SMEs have the resources or awareness to present their business in a ‘lender-ready’ way.
Solution: Many SMEs struggle with presenting accurate information to lenders. DataGardener’s insights enable lenders to support SMEs more effectively, guiding them through what is needed and providing clear, explainable lending decisions.
This enhances the relationship and streamlines the process for both parties.
Grasp the Lending Opportunity in 2025 with Data-Driven Insights
The next few months could be crucial for small and medium-sized enterprise (SME) lending in the UK. New data reveals notable activity across the business credit landscape between June and August 2025:
- 31K+ charges are due to be renewed — a clear indication that many businesses may be considering restructuring or refinancing.
- Over 589K charges remain active, suggesting a strong appetite for credit among small and mid-sized companies.
- More than 310K charges have already been fully satisfied, reflecting healthy repayment behaviours across a vast portion of the market.
- Approximately 1.3K+ charges are partially satisfied, which may indicate that businesses are managing staged repayments or seeking flexibility in their funding journey.
These figures are based on an analysis of over 5 million live UK companies, providing a comprehensive view of current and upcoming funding needs in the SME sector.
Such insight can be valuable for financial institutions seeking to better understand the businesses they serve and prepare for the lending needs of tomorrow.
Source: DataGardener, 5 million+ live UK companies
Final Thoughts
SME Lending in the UK is evolving fast. The need is there. The challenge is real. But so is the solution. With innovative tools like DataGardener, lenders can finally close the gap between SME demand and financial support, with better insights, faster approvals, and fairer decisions. 2025 is the year to act.