Small businesses that secure external finance are significantly more likely to survive and grow, according to new analysis highlighting the growing role of specialist lenders in filling a gap left by traditional banks.
Research from Capital Economics, commissioned by SME lender iwoca, found that companies receiving finance from the lender were 70 per cent more likely to remain active after three years compared with the wider UK business population.
The analysis tracked more than 23,000 businesses incorporated between 2020 and 2025 by matching Companies House records against iwoca’s loan book.
Among firms established in 2021 that received an iwoca loan the following year, 80 per cent remained on the Companies House register in 2025. This compared with 46 per cent of all UK businesses founded in the same year.
The findings underline the importance of access to capital for smaller companies, many of which continue to struggle with cash-flow pressures.
Nearly half of small businesses recently surveyed by Intuit QuickBooks reported cash-flow difficulties, with delayed payments, rising costs and limited access to funding creating barriers to expansion.
Specialist lenders, challenger banks and non-bank providers have increasingly moved into the space traditionally dominated by high street lenders. These providers now account for 68 per cent of UK gross SME lending, up from 39 per cent in 2012.
The shift reflects growing demand for faster and more flexible finance. Traditional lenders can take several weeks to make lending decisions, leaving smaller firms vulnerable to missed opportunities.
Since launching in 2012, iwoca says its lending activity has supported an estimated £3.5bn contribution to UK GDP over the 12 months to January 2026, alongside more than 51,600 jobs and around £1bn in tax revenues.
The lender estimates that every £100 deployed through its loans supports £230 of economic activity.
The impact has been spread beyond London, with 79 per cent of iwoca-funded businesses based elsewhere in the UK, including strong activity in the North West, West Midlands, Yorkshire and Humber, and the East of England.
The findings come as policymakers and economists continue to debate how best to improve productivity and growth among Britain’s smaller businesses, which account for a significant share of employment and economic activity.
For many entrepreneurs, access to timely finance is increasingly becoming a deciding factor between expansion and failure.
Mark Nathan, Founder of CQD Cleaning Services, said: “Throughout our business journey, we’ve always used SME finance. Since starting my cleaning services company, access to finance has been absolutely crucial for our growth.
“I’m not surprised by the Capital Economics report results suggesting that businesses are 70% more likely to succeed if they have access to finance – that’s something I’ve experienced firsthand.”
Christoph Rieche, CEO and co-Founder of iwoca, said: “When 99.9% of the UK’s businesses are SMEs, they act as an important proxy for broader economic health. Finance for these businesses goes a long way – iwoca’s loans have generated £13bn in GDP in under 15 years, and supported over 51,600 jobs in the UK in the last year alone.
“Small businesses with real potential are being held back because many can’t access the finance they need at the right moment, it’s certainly not a lack of ambition. What this research shows is that when finance is delivered, businesses are much more likely to weather difficult periods and succeed over the longer term. With better financial support, SMEs tend to grow revenues, hire, build something sustainable, and contribute substantially to the economy.”
Janine Hirt, CEO of Innovate Finance, said: “Fintech SME lending was a novel disruptor over a decade ago, and today, it has grown to be necessary financial infrastructure. iwoca’s research shows what this means in practice – for hundreds of thousands of UK SMEs, specialist lenders are no longer a fringe option, but often one of the only ways to access finance reliably, grow, and keep contributing to the economy.
“The fact that 68% of UK SME lending now flows through challenger and specialist lenders shows that fintech players have become a mainstay of the SME lending market and a driver of growth.”
Andrew Evans, Deputy Chief Economist at Capital Economics, said: “The scale of the difference in business outcomes between iwoca customers and the wider business population is quite striking. Businesses that received an iwoca loan in their first year were 70% more likely to still be trading three years on, and the gap holds across different incorporation years and stages of company maturity.
“The evidence is clear: flexible, accessible lending is associated with growth beyond individual firms – and with the jobs, output and tax revenues that benefit the wider economy.”
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