The UK's small business lending landscape is being reshaped by fintech platforms as traditional high street banks continue to scale back their exposure to the sector. Iwoca, the London-based SME lender, reported that it originated £1.4 billion in loans to British small businesses over the past twelve months, while Tide's credit products reached £650 million in disbursements since their launch in 2023. Together with platforms such as Funding Circle, MarketFinance and Capify, alternative lenders now account for an estimated 28% of all new SME lending in the UK, up from 15% just three years ago.

Iwoca co-founder Christoph Rieche said the shift reflected deep structural issues in how legacy banks assess small business risk. "Traditional banks still rely heavily on manual underwriting and collateral-based models that exclude the majority of UK SMEs," he said. "Our technology can assess a business using real-time accounting, banking and trading data, and deliver a decision within hours." The British Business Bank's latest Small Business Finance Markets report confirmed that bank lending to SMEs fell by 8% in 2024, with the steepest declines among businesses with turnover below £500,000.

The growth of fintech SME lending has attracted regulatory attention. The FCA and the Prudential Regulation Authority are jointly reviewing the systemic implications of non-bank lending growth, with a discussion paper expected in early 2026. Mike Cherry, national chair of the Federation of Small Businesses, welcomed the competition but cautioned that "any new regulation must avoid inadvertently raising barriers for the very lenders that are keeping small businesses funded." Industry observers expect further consolidation in the sector, with larger platforms likely to acquire smaller competitors to gain scale and diversify their product offerings.