24th January 2023

ESG is revolutionising the way SMEs improve their credit worthiness.

Improving small firms’ access to finance is essential for growth, investment and innovation

The FSB and leading FinTech companies have urged Grant Shapps to take action in order to ensure that small businesses across the UK can access loans, advocating for improved borrowing facilities as a major contributor towards driving economic growth.

Commenting on the letter, Martin McTague, national chair of the FSB, supported the fintechs firms’ calls and said improving small firms’ access to finance was “essential for growth, investment and innovation.”

“We’re going to need to explore new ideas to change this around, such as the lending passport, which has the potential to help small firms in their search for funding by simplifying the application process, saving them time and duplicated effort,” he said.

“Anything which promotes competition and a greater range of options in the finance market is especially critical, and especially welcome, right now,” McTague said.

A recent survey conducted by Codat has revealed that while only 6% of businesses are content with the existing SME credit market, an alarming 55% admitted to having taken out loans in their own name to finance operations. Nearly half reported facing a significant challenge when applying for funds due to excessive bureaucracy.

Demand for sustainable finance is growing

As the demand for sustainable finance grows, lenders are responding to this trend with an increased focus on Environmental, Social and Governance (ESG) related lending strategies. Recent surveys reveal that almost all surveyed mid-market lenders expect ESG investment will rise soon – a stark indication of how corporate responsibility is now being factored into credit risk assessment decisions by those operating across financial markets worldwide.

The past two years of pandemic-related pressures have taken precedence over the ESG environment for non-listed companies. However, our survey reveals that lenders are now feeling an increased pressure to up their sustainability credentials to meet market expectations.

ESG is revolutionising the way SMEs improve their credit worthiness. We are proud to be partnering with NatWest, offering sustainable and ethical support for businesses across the UK.