// INTELLIGENT TECHNOLOGY //
As SME lending review launched, new tech could unlock £ 5 billion in credit annually by halving declined applications
S mall- and medium-sized enterprises( SMEs) in the UK miss out on an estimated £ 5 billion in potential access to credit each year, because they are unaware of addressable issues with their corporate credit profiles, according to research by FXE Technologies, as part of an industry coalition led by the Centre for Finance, Innovation & Technology( CFIT). As part of its coalition, CFIT is examining the role that digital fundability tools can play in improving SMEs’ access to finance. One tool being tested is FXE’ s Funding Health Checker, which could transform SMEs’ visibility of how lenders assess their credit applications, after a pilot dramatically improved understanding of‘ fundability’ among four-fifths of companies.
FXE examined the credit profiles of 24,000 businesses declined for loans since 2019. It found that approximately 65 % had‘ readily fixable’ profiles, resulting in unsuccessful loan applications which could have been approved. Issues included excessive use of overdrafts, missed payments to suppliers, filing accounts late with Companies House and accounts showing a net negative asset position. The directors interviewed by FXE had frequently not understood that these behaviours would restrict their access to credit. Extrapolated to the whole population of UK SMEs, that equates to over £ 5 billion of potentially accessible debt financing left on the table.
A new tool could soon change all that, giving SMEs the kind of simple, objective and personalised feedback on loan applications that is already commonplace in consumer lending. FXE is working with CFIT’ s latest coalition to test its prototype Funding Health Checker. This digital dashboard shows SMEs the data from CRAs, Companies House and other forms of alternative data that lenders use to review a company’ s application, flagging areas of concern and suggesting actions to improve creditworthiness. In a pilot, 80 % of participating SMEs said the tool significantly improved their understanding of their fundability; 85 % planned to take the suggested steps and 90 % would recommend the tool to a peer. The CFIT-led coalition, supported by Mastercard, Lloyds Banking Group and HSBC UK, launched earlier this year to develop precisely this type of techdriven solution to help SMEs who might be reluctant to apply for finance.
By clearly showing the financial habits and data points that affect lending decisions, the Funding Health Checker will help SMEs understand their financial health, how their business is viewed by lenders and what they can do to improve their chances of getting approved. This kind of education is vital to improving confidence among business owners, many of whom are unaware of the factors that determine credit readiness. �
30 Intelligent SME. tech