CFIT says financial health tools could unlock GBP £5 billion

The Centre for Finance, Innovation and Technology has launched a report on improving access to finance for UK small and medium-sized enterprises, saying financial health tools could unlock GBP £5 billion in additional SME lending each year.

The report is the outcome of CFIT's third SME coalition, which brought together banks, fintechs, data providers and government participants to examine barriers to lending. Partners included Lloyds Banking Group, Mastercard, HSBC, FXE Technologies, Menna AI, Life Moments, GFA Exchange and Capitalise.

According to CFIT, the UK's SME finance gap is driven less by a shortage of capital than by weaknesses in readiness and information. It cited fragmented financial data, limited understanding among smaller businesses of how lenders assess creditworthiness, reduced access to in-person guidance following the decline of branch banking, and poor support after loan rejections.

These issues matter because SMEs account for more than 99% of UK businesses and employ most of the private sector workforce. Fewer than half of SME loan applications are approved, while only about one-third of firms expecting to apply believe they will be successful.

The analysis drew on about 100,000 declined SME applications and found that around 65% were rejected due to addressable barriers rather than fundamental ineligibility.

Two tools

As part of the work, the coalition developed and tested two prototype financial health tools to help businesses assess their lending readiness before and after applying for loans. The first, a Financial Health Checker created by FXE Technologies, is a diagnostic tool that identifies barriers to approval and suggests actions to improve eligibility.

The second, a Small Business Coach developed by CFIT and its partners, is an AI-enabled advisory tool for earlier-stage SMEs. It is designed to guide cash flow, credit readiness, resilience, compliance, and growth planning.

Testing of the Financial Health Checker with major banks showed high SME engagement, CFIT said. It reported that 94% of users found the tool useful, 98% said they would act on its recommendations, and confidence in applying for finance rose from 53% to 77%.

Wider use of such tools could support around 200,000 additional businesses a year, according to CFIT, which argued that lenders should offer them before an application, during the process and after a rejection.

Policy focus

The work sits alongside broader UK policy efforts on business finance and data sharing. CFIT said the report is framed by measures including the Data (Use and Access) Act 2025, HM Treasury consultations on commercial credit data sharing, the Mandatory Bank Referral Scheme, and the British Business Bank's role in supporting SME finance.

It also highlighted weak outcomes from existing referral processes, noting that more than 90% of SMEs referred through the Mandatory Bank Referral Scheme fail to secure alternative finance.

At the launch event in London, Blair McDougall MP, Minister for Small Business and Economic Transformation at the Department for Business and Trade, set out the government's view of the findings. "Small and medium-sized enterprises are the backbone of the UK economy, and supporting them to access the finance they need to grow is central to delivering sustainable economic growth. This report from CFIT demonstrates the power of collaboration between industry and Government to tackle complex, systemic challenges. It sets out clear, practical steps to improve how finance is accessed and delivered, including the role that smart data and innovation can play in supporting small business growth," he said.

Anna Wallace, CFIT's Chief Executive, said the findings suggested the lending gap could be narrowed through practical changes in how lenders and policymakers support applicants. "This report shows that a significant part of the SME lending gap is fixable. Too many viable businesses are being locked out of finance, not because capital is unavailable, but because they lack the visibility and guidance needed to be finance-ready. CFIT's role has been to bring the market together, test practical solutions, and show that there is a credible path to scale. The next step is clear: for lenders to embed these tools into the finance journey, and for Government to support the implementation of an accountability framework that allows them to work at scale."

"If we can continue to work together to get that right, we can materially improve access to finance for SMEs and unlock growth across the UK economy."