# SMEs are more resilient than we give them credit for
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-02-22
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: UK SMEs: Beyond Covid-19 Challenges
Meta Description: Explore how UK small businesses are pivoting and rising to challenges amidst the pandemic, with a focus on growth funding and economic recovery.
URL: https://financedigest.com/smes-are-more-resilient-than-we-give-them-credit-forhtml

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_By **Simon Cureton,** CEO of Business Finance Marketplace,_ [_Funding Options_](https://www.fundingoptions.com)

It’s an unfortunate truth: bad news sells. So, it’s no surprise the narrative around UK SMEs over the last 12 months has painted a bleak picture. While we cannot forget the casualties caused by the pandemic or pretend it’s been anything other than an exceedingly challenging environment, there are silver linings.

When faced with adversity, UK independent businesses demonstrate incredible resilience, agility and perseverance. And the impact of Covid-19 has seen [business owners rise to the challenge, pivoting their business models](https://www.financedigest.com/apis-open-banking-and-new-business-models.html "APIs, Open Banking and New Business Models") and displaying the entrepreneurial grit you’d expect from people driven by solving problems. And that spirit won’t be diminished by this. In fact, [Office for National Statistics figures](https://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/bulletins/businessdemographyquarterlyexperimentalstatisticsuk/quarter42020) show a surge in the number of business registrations as 2020 closed out – comfortably higher than 2019 and pre-Covid levels.

Despite a chastening start to the year – the end of the Brexit transition period and the UK enduring a [third lockdown](https://www.financedigest.com/shanghai-expands-covid-lockdown-as-new-daily-cases-surge-by-a-third.html "Shanghai expands COVID lockdown as new daily cases surge by a third") – the fast roll-out of the vaccination programme has revealed a light at the end of the tunnel. It’s time now to think about life beyond the [Covid-19 derailment and to get back](https://www.financedigest.com/eu-regulator-backs-novavax-shot-as-regions-fifth-covid-19-vaccine.html "EU regulator backs Novavax shot as region’s fifth COVID-19 vaccine") on track. One which offers greater competition, innovation and choice when it comes to the [growth options available to businesses](https://www.financedigest.com/uk-needs-to-make-politically-unpopular-reforms-to-boost-growth-business-group-says.html "UK needs to make politically unpopular reforms to boost growth, business group says").

We welcomed the [Chancellor’s](https://www.bbc.co.uk/news/business-55958712) decision to allow small businesses more time to repay state-backed loans to help them get back on their feet using a “pay-as-you-grow” initiative. This will help to [liberate businesses](https://www.financedigest.com/should-your-business-reconsider-invoice-financing-top-tips-on-why-reappraising-this-method-liberates-business-cash-flow.html "Should your business reconsider invoice financing? Top tips on why reappraising this method liberates business cash flow") from the shackles of debt taken on while in survival mode.

The extension affords [business owners the freedom to operate](https://www.financedigest.com/how-business-owners-can-improve-their-operational-and-financial-performance-through-contactless-and-card-payments.html "How Business Owners can Improve their Operational and Financial Performance through Contactless and Card Payments") as they might have done pre-pandemic. Encouraging businesses to incur a debt mountain they can never conquer would be wilfully irresponsible. It is hard to remember life before [Covid-19 and even harder to anticipate what the world will look like beyond the pandemic](https://www.financedigest.com/uk-sees-biggest-rise-in-foreign-workers-since-covid-19-pandemic.html "UK sees biggest rise in foreign workers since COVID-19 pandemic"). But, at the opportune moment, [businesses must](https://www.financedigest.com/a-taxing-issue-ten-tax-invoicing-pitfalls-that-international-businesses-must-avoid.html "A taxing issue: Ten tax invoicing pitfalls that international businesses must avoid") feel confident and mentally unburdened enough to invest. Because it is through [growth that the UK’s SMEs will drive the economic](https://www.financedigest.com/economic-growth-risks-jolt-inflation-obsessed-markets.html "Economic growth risks jolt inflation-obsessed markets") recovery.

At that moment, they will need a vibrant, agile and diverse lending ecosystem to support them creatively and expeditiously.

**Boosting market-based lending**

![Simon Cureton](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/funding-options-headshots-formal-4sept19-31-img9186s-450x563-1736838558581-compressed.jpeg)

Simon Cureton

Where the [government has diligently stepped in to offer comprehensive support](https://www.financedigest.com/where-do-small-businesses-turn-when-government-support-dries-up.html "Where do small businesses turn when government support dries up?") schemes, it has also eschewed the opportunity to embrace fast-emerging alternative lenders. With less market-based lending activity, the BBLS and CBILS schemes have [reduced the level of choice and competition for UK businesses](https://www.financedigest.com/simple-ways-to-reduce-business-costs.html "Simple Ways to Reduce Business Costs"). Lenders have been tethered to a lamppost, unable to offer their own products, which in many cases would facilitate funding faster.

This backtracking from its determination and commitment to offer SMEs greater competition has slowed the development of the UK’s thriving [fintech industry](https://www.financedigest.com/how-fintechs-are-supporting-the-hospitality-industry.html "How fintechs are supporting the hospitality industry") somewhat – but it is far from too late. ‘Survival funding’ must become a thing of the past and be replaced once again by [growth funding to ensure a bright financial future](https://www.financedigest.com/automotive-catalytic-converter-market-trends-growth-future-demand-analysis-and-forecast-by-2028.html "Automotive Catalytic Converter Market Trends, Growth, Future Demand, Analysis and Forecast by 2028")

With the Chancellor Rishi Sunak expected to provide further updates in his Budget next month, it’s essential that decisions are driven by a determination to boost market-based lending, harnessing the collective capabilities of the [alternative finance](https://www.financedigest.com/demystifying-alternative-finance.html "DEMYSTIFYING ALTERNATIVE FINANCE") providers.

As we eventually reduce the economy’s reliance on government-backed schemes [next year](https://www.financedigest.com/uaes-adnoc-to-open-swiss-trading-office-next-year.html "UAE’s ADNOC to open Swiss trading office next year"), we hope to see a resurgence in the SME lending market. Whether it returns to [pre-Covid levels](https://www.financedigest.com/foreign-tourism-to-portugal-surpasses-pre-covid-levels-in-july.html "Foreign tourism to Portugal surpasses pre-COVID levels in July") remains to be seen, but we expect to see more lenders offering their own solutions. In this scenario, lenders will be able to distribute their [products and services](https://www.financedigest.com/productivity-and-the-four-day-working-week-in-financial-services.html "Productivity and the four-day working week in financial services") much more efficiently, utilising proprietary platforms and infrastructure.

**Giving fintechs a seat at the table**

To a reassuring extent, the industry has withstood the pressure, with a huge [number of loan approvals and an acceleration in the digital](https://www.financedigest.com/inskin-media-makes-a-number-of-strategic-hires-as-it-furthers-its-mission-to-maximise-attention-and-impact-in-digital-campaigns.html "Inskin Media makes a number of strategic hires as it furthers its mission to maximise attention and impact in digital campaigns") agenda. But it has also highlighted two problems. The first being the level of fragmentation in the sector – with high street banks, challengers, neo banks, alt-lenders and fintechs all vying for [market share](https://www.financedigest.com/sterile-vials-market-share-and-growth-factors-impact-analysis-2021-2031.html "Sterile Vials Market Share and Growth Factors Impact Analysis 2021 – 2031"). The second problem is that at the start of the pandemic, agile [fintech players were sidelined as the government leaned heavily on the incumbent banks](https://www.financedigest.com/how-partnerships-between-fintech-start-ups-and-traditional-banks-herald-a-brave-new-world-of-opportunity.html "How partnerships between FinTech start-ups and traditional banks herald a brave new world of opportunity").

Having said this, following criticism early last year, the government opened up the scheme to more players. If there is a lesson to be learned, it is that these [businesses shouldn’t have been left out in the cold when it came to the crunch – particularly as the UK has long been heralded as the epicentre of fintech](https://www.financedigest.com/how-to-overcome-the-current-challenges-facing-your-fintech-business.html "How to overcome the current challenges facing your fintech business") advancement.

It’s safe to say, Covid-19 has proved to be the catalyst for action, particularly in the SME lending space to [drive more innovation and also to highlight the fissures in the industry](https://www.financedigest.com/industrial-automation-incentives-by-governments-in-emerging-economies-drive-industrial-robots-market-fmi-study.html "Industrial Automation Incentives by Governments in Emerging Economies Drive Industrial Robots Market: FMI Study") that still need to be tackled. This will arguably usher in significant change and [digital disruption](https://www.financedigest.com/the-road-to-digital-disruption-in-motor-insurance.html "The road to digital disruption in Motor Insurance") in the coming years.

However, there needs to be a shift in mentality where the [fintech sector is no longer seen as the “cool kid” on the block but is properly recognised as playing a critical role](https://www.financedigest.com/the-role-of-fintech-in-shaping-innovative-future.html "The Role of Fintech in Shaping Innovative Future") in a crisis of this size. In response, an independent Fintech Strategic Review led by [Ron Kalifa OBE](https://www.gov.uk/government/news/review-launched-to-boost-uk-fintech-sector) is currently underway to look at how the nation can foster innovation, maintain an ecosystem that supports growing businesses, and promote the integration of new technologies.

It’s imperative that [innovation is not stifled and instead encouraged to prosper during turbulent](https://www.financedigest.com/the-turbulent-road-to-innovation.html "THE TURBULENT ROAD TO INNOVATION") times. There is a lesson to be learnt here, where we [need a real balance between banking](https://www.financedigest.com/could-the-npa-be-the-catalyst-banks-need-to-transform-their-payment-networks.html "Could the NPA be the catalyst banks need to transform their payment networks?") and the fintech sector. [Open banking](https://www.financedigest.com/how-accountants-can-improve-financial-planning-and-results-through-open-banking-to-help-smes.html "How accountants can improve financial planning and results through Open Banking to help SMEs") was introduced to do just that – level the playing field – however its impact has been challenged. In future, the government and the fintech [industry need to work in unison to champion not just SME recovery but their growth](https://www.financedigest.com/cbd-gummies-market-current-scenario-and-industry-growth-forecast-with-major-key-players-data-2030.html "CBD Gummies Market| Current Scenario and Industry Growth Forecast with Major Key Players data 2030").


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