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Small and Medium Enterprises (SMEs) Finance

05 June 2023

Among big corporations, it is well known that small and medium-sized businesses deserve support. SMEs are integral to the UK economy, because they supply products and services that are useful to a variety of people, with a very small amount of staff. In the UK Parliament's 2022 statistics, SMEs accounted for 61% of UK employment and 7% of business turnover.

What is an SME?

An SME is a small or medium-sized enterprise, defined by the amount of staff and annual turnover. They are a really important factor of the economy, as the entrepreneurial aspect helps drive social innovation.

According to Gov.uk, the difference between a small organisation and medium-sized organisation is:

  • A small organisation is a business that has more than 10 employees
  • A medium-sized organisation is a business that has over 50 but less than 250 employees

Micro-organisations have a headcount of less than 10 employees.

Essentially, and according to Gov.uk, an SME is an organisation with less than 250 employees and a turnover of less than €50 million or a balance sheet total less than €43 million.

At the beginning of 2022, total employment of SMEs in the UK was 16.4 million.

What are the financial challenges SMEs face?

Finance is vital in order to let SMEs grow. Often, small and medium-sized enterprises encounter difficulties with the financing gap. This is the space between the finance available to them, and what they could successfully grow with using an investor, which is not always accessible. As often as not, some investors may be hesitant to fund an SME, because of the following:

  • Rising inflation within the UK economy
  • Labour shortages
  • The reduction of customers spending money
  • The risk that a small or medium-sized enterprise could possibly end up in administration

That being said, each SME cannot be compared - whether that is a business with a headcount of 11, or 63. A lender must be able to support the individual with the financial needs of the business.

See our Finance Solutions to discover the help available.

Why should SMEs be supported?

It’s no surprise that small and medium-sized businesses were predominantly affected by the coronavirus pandemic in 2020. OECD iLibrary stated that the main measures of bank lending to SMEs surged to record highs, driven by the use of the UK Government's loan schemes.

In 2020, the Bank of England reported that a gross flow of bank lending to SMEs (not including overdrafts), reached a record high. This was mainly due to the financial programmes the government provided in response to Covid-19. These financial support services from gov.uk included:

  • Coronavirus Business Interruption Loan Scheme: SMEs were able to access loans and other financial services up to £5,000,000, guaranteeing 80% of the finance to the lender, paying interest and any fees for the first 12 months
  • Bounce Back Loan Scheme: This was a procedure that allowed SMEs to borrow between £2,000 and up to 25% of their turnover. The maximum load available was £50,000. The government guaranteed 100% of the loan with no fees or interest to pay for the first 12 months. Afterwards, it would be 2.5% a year.

The UK Parliament rolled out numerous policies introduced by the government and the Bank of England, in order to support business and workers, and mitigate at least some of the negative economic impacts from the pandemic and lockdowns. Consequently, this is when a large amount of SMEs became even more adaptable and stronger; they were able to innovate further, and more creatively, by operating their businesses online. This has helped generate:

  • E-commerce sales
  • Social media presence, creating more customers globally
  • The growing awareness that smaller and medium-sized businesses should be supported

With this quick response in a time of crises, it is sure that SMEs deserve financial support. Once given the resources they need to expand, it opens up the scope for more employment opportunities, economic growth, and the ability to monitor how we drive social change.

If you are an SME and would like help with growing your business financially, get in touch

Sources of funding available for an SME

Whether you are a small or medium-sized business, it can be difficult knowing what types of funding you are eligible for. There are many different ways to utilise the funding that is available.

The types of funding SMEs can acquire include:

  • Crowdfunding: the form of fundraising where businesses turn to communities and online help for contributions
  • Traditional bank loans: borrowing a sum of money for business purposes from a bank provider, and then repaying in regular instalments
  • Directors loans: obtaining money from your business that is not a salary or expense payment; nor is it money you’ve already paid into the company
  • Grants: a gifted amount of money that doesn’t require paying back
  • Angel Investors: a group or individual who is usually knowledgeable about wealth and entrepreneurship; and is able to help finance the company using their own money, in exchange for a share of the business.
  • VC Funding: Venture Capitalist funding invests in SMEs similar to an angel investor. With the financial support they offer, they can also provide their guidance and professional expertise

Find our more about our business loans

Important Forms of SME Finance and lending

If your SME is in the technology innovation or science industry, you could claim research and development tax relief, allowing you to deduct an extra 86% of qualifying costs from your yearly profit.

This is available to your business if:

  • You have less than 500 staff
  • You have a turnover of under €100,000,000

Startup loans are more approachable for many SMEs, they do not require you going to the bank. This type of financial loan can come through a programme or lender which is backed by the government.

However, unlike a business loan, you will need to:

  • Pass a credit check
  • Have a UK-based business that has been in full trade for less than 36 months

Kickstart your business with our Startup Finance services.

How we can help SMEs

The finance market can be overwhelming and saturated with information. At Union Business Finance, we pride ourselves on having over 10 years’ of experience, providing you with the financial information and help you need.

It’s understood that emergencies turn up unexpectedly; whether that is to replace broken equipment, funding for urgent materials, or even the opportunity to secure something that will help achieve sustainable growth. With our Instant Business Loans, you can borrow between £10k to £300k with rates from as little as 6%.

SMEs often require a boost in finance to allow their success to continue expanding. Our Short-Term Business Loans allow you to borrow as much as 300K in as little as 48 hours; giving you the chance to take new opportunities and cover the costs within a short time frame.

Business Cash Flow Loans are a great way to access cash quickly. Perhaps you may need to buy a new piece of equipment for your business, staff training, or you need to pay a bill on time - this loan helps you to make these decisions.

We offer a very swift application process that is kept as simple as possible, allowing you to carry on doing what you need to do.

We offer:

  • Easy online application
  • Quick credit checks
  • High approval rates
  • Fast access to funds
  • Short repayment terms

Discover how we can help with finance for your SME today

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Aintu Ltd T/A Union Business Finance is an independent Asset finance broker not a lender, as such we can introduce you to a wide range of finance providers depending on your requirements and circumstances. We are not independent financial advisors and so are unable to provide you with independent financial advice. Aintu Ltd T/A Union Business Finance will receive payment(s) or other benefit from the finance provider if you decide to enter into an agreement with them. Aintu Ltd T/A Union Business Finance is an appointed representative of AFS Compliance Ltd which is authorised and regulated by the Financial Conduct Authority under number 625035. Aintu Ltd T/A Union Business Finance aims to provide our customers with the highest standards of service. If our service fails to meet your requirements and you would like to report a complaint; please click on the link below;


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