Today, around 99% of all businesses in the UK are classified as SMEs, employing around 61% of the workforce in the private sector. However, despite their crucial role in the UK economy, many SMEs are struggling.
A recent study found that the number of small businesses in the UK has fallen from 5.9 million in 2020 to 5.5 million today. Many businesses are feeling the pressure of increasing operating costs, slow revenue recovery and, most importantly, the ongoing struggle to secure financing.
Addressing these financing challenges is essential to help SMEs survive and grow, and fintech solutions are making a real impact in this area. For example, PayPal has stepped in to address the £2.5 billion funding gap facing UK small businesses in the past 10 years by PayPal working capital solution. With its flexible approach, PayPal Working Capital provides SMEs with a fast and flexible way to access the capital they need, based on their sales history.
Traditional financing methods can present barriers for small businesses
The UK’s traditional lending system can pose challenges for smaller and newer businesses, with extensive documentation, long approval times, and strict lending standards creating barriers for SMEs. In April 2024, for example, the Treasury Committee reported that small businesses faced “unnecessarily tougher” conditions due to restrictive measures from banks and regulators, which could prevent them from securing underlying funds.
The Federation of Small Businesses (FSB) has also expressed concerns about low financing success rates. Before the pandemic, 65% of SMEs were able to secure financing, a figure that drops to 61% in 2023. As a result, businesses seeking reliable financing are increasingly turning to fintech options as a more accessible and adaptable alternative. . In fact, according to research conducted by Sonovate in 2023, four in ten SMEs prefer fintech lenders over high street banks when looking for business financing.
FinTech solutions provide SMEs with alternative financing options
From managing cash flow to purchasing inventory, investing in technology or upskilling employees, SMEs rely on finance to support their growth. Fortunately, fintech solutions, such as PayPal Working Capital, offer SMEs alternative financing options that are easier to implement and manage.
SMEs need modern financing solutions that fit the realities of running a small business, and options like PayPal Working Capital provide an attractive alternative. Unlike traditional business loans from banks, PayPal Working Capital provides financing based on an SMB’s PayPal sales history. This enables businesses to borrow up to 35% of PayPal’s annual sales without having to show extensive financial projections. The application process is quick and straightforward, with funds available quickly.
Furthermore, with PayPal Working Capital, small businesses choose what percentage of their PayPal sales will go toward repaying the cash advance so it can be tailored to fit the cash flow needs of the business. Reimbursements are tied to daily sales, meaning companies pay more when their sales are high and less during slower periods. With one fixed fee, business owners are freed from ongoing interest charges and have a clear view of their total repayment costs, which means no unwelcome surprises.
How can fintech solutions help your business grow?
Since its inception in 2014, PayPal Working Capital has distributed £2.5bn to 58,000 UK businesses across a variety of sectors. From fashion to auto parts, these cash advances have allowed small businesses to thrive in today’s challenging economic landscape. Nine out of 10 (91%) of these companies said their revenues either increased or remained flat thanks to the funding they received.
London Candle Company is one of the companies that has benefited from PayPal Working Capital. A small business focused on selling high-quality, competitively priced candles in bulk to catering and hospitality businesses, The London Candle Company has benefited from PayPal Working Capital’s innovative approach to payment.
“PayPal Working Capital has been extremely useful when I needed to stock bulk candles before the busy winter months, especially because I needed to pay suppliers straight away,” explains founder and managing director, Jonathan Welland, “I found it simple and easy to use too.” , where you choose what percentage of your sales you pay towards the advance – you still have cash flow coming in but you only lose part of it. Before I knew it, he was paid.
Small business owners across the UK, like Jonathan, are already making the most of fintech models, which are rapidly transforming the traditional lending industry. Could your business be next? Find out more information about PayPal working capital And enable expansion of your business.