The UK’s small and medium-sized businesses are undoubtedly ambitious and ultimately want to grow, yet many face obstacles beyond their control. Rising costs and tax burdens increasingly push them toward external finance but securing that funding is a challenge. The reality is, SME growth is not halted because of a lack of ideas or entrepreneurial drive, but because of the limited access to the resources needed to turn ambition into action.
For years, SMEs have been known as the heart and soul of the UK economy, employing millions of people and driving innovation. However, despite their importance, many business owners are finding growth difficult to achieve.
Recent findings reveal these concerns: tax burdens were the biggest barrier to growth in 2025 for 25% of SMEs, followed by rising costs (24%). This creates a business environment where growth feels more difficult and expensive, as profit is being absorbed by outgoings that could otherwise be invested in the future. Not only that, but it creates a knock-on effect on the number of jobs created, extending the consequences far beyond individual businesses. For additional support, businesses turn to external finance, as research shows an overwhelming 82% of SMEs applied for external finance in 2025, proving how critical funding has become to help stay standing.
Demand for finance is only part of the story. What’s even more concerning is that 81% of SMEs reportedly missed business opportunities due to a lack of available funding, representing contracts not won, equipment not purchased, staff not hired and innovations never brought to market. This should be a wake-up call for lenders and policymakers, particularly for smaller businesses caught by unexpected costs in the early stages of their growth.
The lending industry is at an inflection point. SMEs are not asking for charity or special treatment, they are asking for a system that keeps pace with their ambition. Lenders who embrace that shift will not only unlock growth for their customers, but they will also secure their own relevance in a market that is changing faster than many are willing to admit.
One of the reasons for this unavailability of finance is because traditional lending models have often struggled to keep pace with the speed and complexity of modern business. Instead of being simple, fast and flexible, they have lengthy application processes leaving viable businesses waiting too long for the capital they need. Easy access to loans is vital for SMEs’ survival and growth. Without it, it is difficult for them to seize opportunities when they arise.
We see this regularly at Lovey: businesses with strong fundamentals and clear growth plans, turned away not because of risk, but because of process. The data to make smarter lending decisions already exists. The real question is whether traditional institutions have the appetite to act on it. Those that don’t will simply become too slow to serve the businesses that need them most.
A more encouraging statistic is that there is a growing acceptance of AI-supported lending, as 83% of SMEs are comfortable with it if it is paired with human expertise. As companies move towards digital-first propositions, it’s understandable that they opt for digital application processes to improve efficiency and widen access. But business owners do not want algorithms to completely replace people – they still look for that human touch.
Combining AI and human expertise can transform SME lending by offering the technology to analyse applications more quickly while also maintaining the human element to ensure decisions are made fairly and offer tailored solutions to each business. SMEs having the knowledge that their approvals are overseen by a human, and being able to speak to a person when desired, offers reassurance and a sense of security during a process which can often feel stressful.
The message from SME owners is clear. They are willing to put in the hard work to invest, innovate and grow, but hit a brick wall when it comes to external support. What they need is an environment that supports those ambitions rather than constraining them.
Britain’s entrepreneurs have never lacked ambition. The question now is whether the systems designed to support them can evolve quickly enough to unlock it.
SMEs are ready to drive the next phase of economic growth. Reducing barriers, improving access to finance and embracing responsible AI-powered lending could help ensure that ambition is rewarded rather than restricted.
About the author
Alex O’Malley is chief commercial officer at Lovey, one of the UK’s fastest-growing SME lenders and brokers. He joined Lovey in 2017 and has been central to its commercial growth, progressing from head of sales to a seat on the board. He now leads Lovey’s commercial strategy across sales, partnerships and product development.
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Meta description: 81% of SMEs missed business opportunities due to lack of funding in 2025. Alex O’Malley, chief commercial officer at Lovey, explains why AI-supported lending could be the answer.
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