The COVID-19 pandemic is now history. However, its effects have had a lasting impact on the SME sector. Half a million small businesses were forced to close down, citing the rising cost of living and the lack of government financial support as being the main causes.

Five years after the pandemic began, both the financial markets and the SME community have come a long way. However, many challenges still exist, especially on the subject of funding. This article sets out to explore those challenges and report on the state of the business financial landscape in the UK today.

The SME Sector and Its Importance to the UK Economy

The initials ‘SME’ stand for ‘Small and Midsize Enterprises’, and the umbrella term covers three size categories:

• Micro businesses
• Small businesses
• Medium-sized businesses

In terms of SME sizes, the government, as of April 6, 2025, has updated company size thresholds with an increase in terms of turnover and balance sheet totals, while the number of employees remains unaltered. The new thresholds are:

Business Category	Turnover Threshold	Balance Sheet Total
Micro-business (Up to 10 employees	£1m (up from £632k)	£500k (up from £316k)
Small business (Up to 50 employees)	£15m (up from £10.2m)	£7.5m (up from £5.1m)
Medium-sized business (Up to 250 employees	£54m (up from £36m)	£27m (up from £18m)

According to the government, the resizing of the thresholds should reduce complexities and regulations for many companies. Examples include businesses reclassified downwards to micro-businesses no longer having to publish a director’s report, and those moving downwards to the small business category, no longer having to do a statutory annual account audit.

But, while this will help operationally, it won’t have any impact on SME funding, and with SMEs employing 61% of the workforce, and 53% of private sector turnover (according to the Finder.com website), funding is a key issue.

Current Funding Issues Facing the UK SME Sector

The SME sector constantly struggles for funding, with government-backed grants being among the hardest to secure. It’s partly down to the fact that the qualification criteria are so hard to meet, and there simply aren’t enough grants to go around.

Then there is the traditional UK banking network. The Big 5 traditional banks are forever tightening their criteria when it comes to business loan approvals, and startups, with no trading history, are the hardest hit. If it weren’t for the rise of the fintech-generated alternative finance sector, the UK economy would be in dire straits.

Business Funding in Australia, New Zealand, and South Africa

The importance of SMEs to the national economy and the attitude of traditional banks as far as providing business loans is concerned, isn’t solely a UK scenario. It’s the same the world over.

The categorisation of SMEs in Australia is different to that of the UK. Micro-businesses employ anywhere between 1 and 4 people, small businesses 5 to 19, and medium-sized businesses 20 to 199. But they are just as crucial to Australia as their UK counterparts are to the JUK, with Aussie SMEs employing 70% of the national workforce and accounting for 98% of turnover.

In New Zealand, SMEs employ a lower percentage of the workforce – just 29.3%- but they nonetheless account for over 25% of national turnover. In South Africa, SMEs employ 60% of the workforce and account for 34% of GDP.

In all of these countries, the situation regarding the business financial landscape is very similar. In Australia, there are 618 government-backed grants and programs. New Zealand has many government grants covering both new and established businesses, as does South Africa via the DTI, SEDA, IDC, and NEF. However, as with all government-backed grants, the number available is limited, and the qualifying criteria are very specific.

As in the UK, the traditional, national banking networks of Australia, New Zealand, and South Africa have all developed seemingly risk-averse business loan policies due to tighter regulatory pressure being introduced. As they struggle to cope with the demand for more flexible financing, unsatisfied businesses in need of financing for startups or growth are turning to the alternative finance sector, whose digital loan products are being shaped to meet the growing demand.

In Australia,  the projected growth rate of the alternative finance sector from 2024 to 2028 is 17.4% (CAGR). It’s expected to take the market value of US$2.68 billion as of the end of 2023, to US$11.26 billion by the end of 2028. In New Zealand, the projected growth rate is forecast at 10.1%, while in South Africa, it’s forecast to grow from US$358.65 billion in 2024 to US$465.66 billion in 2032 – a CAGR of 3.3%.

Concluding Thoughts On Our Exploration of The Global Business Financial Landscape

For entrepreneurs who have the time and patience and whose businesses fit the profiles, government grants are the best way of funding, as they are free. However, the application process is complex and protracted, and success rates are poor.

According to the Grant Tree website, in 2023, the rejection rate on Smart Grants was 96%. As for business loan applications to the traditional bank network in the UK, they have a 56% rejection rate. The pattern is similar in Australia, New Zealand, and South Africa.

Business loan applications made via the alternative finance sector, however, with its digital approach to business loan applications, are more likely to prove successful. Challenger banks are claiming a bigger share of the market than the traditional Big 5 banks. In 2014, their market share was only 27%. In 2023, it had risen to 59%, and the trend continues.

The brokerage services offered by the new digital business loan tendering platforms provide an interesting approach. One application is all it takes to acquire as many as 20 (or more) business loan offers from the alternative finance sector. The application process is less complex, the approval timescale is much shorter, and if successful, you have the opportunity to select the most suitable offers that best align with your business plans.

To read more, Click Here