For example, the news will routinely feature the day’s movements in the FTSE-100, as if provides all one needs to know about the health of the nation’s businesses, regardless of the fact that many of these companies aren’t even British!

Of course, the truth is that within the UK economy, small and medium-sized enterprises (SMEs) form the backbone of innovation, employment, and regional development. With over 5.5 million SMEs constituting 99% of all businesses in the UK, they also reflect the economy’s diversity and resilience.

As more people aspire to start their own businesses, the SME sector is becoming increasingly representative of the society it serves. According to official data, as of 2021, women led 1921% of all SMEs in the UK. This includes 14% of medium-sized businesses, 20% of small businesses, and 194% of micro businesses. Additionally, 24% of SMEs are classified as “equally-led,” meaning they have an equal number of men and women in their management teams. This gender balance is crucial, as diverse leadership teams are often linked to more innovative decision-making and stronger business performance.

Beyond gender diversity, SMEs also play a crucial role in promoting ethnic diversity within the UK economy. In 2021, 6% of SMEs were led by individuals from minority ethnic groups, with the highest concentrations in sectors such as health, administration, and information and communication. These businesses are not just contributing to economic growth; they are also breaking down barriers and creating opportunities for underrepresented groups within the business community.

Consumer trust

SMEs also enjoy a strong relationship with consumers, who increasingly value the trust and accountability that come with shopping locally. According to the recent Forbes Advisor survey, 69% of UK consumers prefer to split their shopping between big and small businesses. Of those who favour small businesses, a significant 57% do so because they want their money to stay within the community, while 43% believe that small businesses offer better quality and service. These figures highlight the critical role SMEs play in not only driving local economies but also in meeting consumer expectations for quality, trust, and ethical sourcing.

•   B&C Awards 2024: The Video
•   LHV makes three new lending director appointments
•   LHV Bank funds £3.6m commercial investment loan

The UK’s SME sector has experienced significant growth since 2010, with the number of small businesses increasing by over a million, according to official statistics. This expansion underscores the entrepreneurial spirit that thrives across the nation, but it also highlights the pressing need for a wide range funding options to support this growth. According to recent government data, SMEs account for 52% of the UK’s private sector turnover, contributing a staggering £2 trillion annually to the economy. Yet, despite their critical role, SMEs often face significant challenges in securing the funding necessary to fuel their ambitions.

Traditional banks, hampered by regulation and a cautious approach to risk, have become less inclined to finance smaller, less-established businesses. This reluctance has created a funding gap that can stifle innovation and growth within the SME sector. Without access to the necessary capital, many promising businesses can find themselves unable to expand, innovate, or even survive in today’s market. That’s where specialist lenders – and the intermediaries who work with them – can play a crucial part in bridging the lending gap.

Today’s SME funders

Challenger banks and specialist lenders have emerged as vital players in providing the much-needed financial lifelines for SMEs. Unlike their high street counterparts, these providers are not encumbered by legacy systems or outdated processes. Instead, they are built on agility, technology, and a deep understanding of the SME market. This allows them to offer a range of flexible, tailored financing solutions that are designed to meet the specific needs of small businesses.

LHV Bank, for instance, offers a variety of loan products that cater to different business needs, from commercial term loans to investment loans. These products are designed with the flexibility that SMEs require, allowing for options such as capital and interest repayment holidays, interest-only periods, and bespoke security packages. This level of adaptability is crucial for SMEs, which often need to pivot quickly in response to market changes or unforeseen challenges.

As the SME sector continues to evolve, the need for diverse and adaptable funding options will only grow, and the traditional banks can’t be relied on to provide the solutions that SMEs will need. Challenger banks and specialist lenders are uniquely positioned to meet this demand, offering the speed, flexibility, and understanding that SMEs need to succeed. This funding is vital to empower the next generation of entrepreneurs to drive innovation, create jobs, and build the future of the UK economy.

SMEs are more than just economic entities; they are a reflection of the country’s rich diversity and entrepreneurial spirit. By supporting these businesses with the tailored financial solutions they need, specialist lenders are playing a crucial role in ensuring that the SME sector remains a vibrant and essential part of the UK economy.