Two-thirds more businesses are experiencing difficulty in accessing finance from high-street banks than they were in 2022 as mainstream lenders pull away from the SME market.

That’s according to new data from Sonovate, the leading provider of embedded finance and payment solutions for the contingent workforce.

These challenges are now so acute that two in five UK businesses say that, due to funding being so hard to access, they are worried about the future of their organisation. This is a bleak picture, particularly when considered within the wider economic context of rocketing interest rates which are having a devastating impact on British businesses.

The findings come as a recent report from British Business Bank shows that equity finance for UK small and medium-sized companies declined by 11% in 2022 to £16.7 billion. This was driven by a downturn in market conditions in the second half of the year which has continued into 2023.

It is a trend that looks set to continue, with half of businesses surveyed by Sonovate saying it has been harder to get the finance they need in comparison to the period before the cost of living crisis.

Furthermore, half of organisations say banks do not understand their business needs, compared to 38% in 2022, and more than half say banks’ lending policies haven’t kept pace with modern business needs, which compares to 41% in 2022.

This disconnect is, in part, being bridged by fintechs, who are stepping in to offer alternative finance options where banks are failing. 40% of businesses agreed that it is easier to access finance from a fintech lender rather than mainstream banks, and seven in ten say their business wouldn’t have survived the current crisis if it weren’t for alternative finance options.

But, with a significant proportion expressing uncertainty in knowing where to find alternative funding providers, it’s clear that more support is needed to signpost the options available to businesses. Indeed, around two-thirds of businesses agree that there needs to be more guidance from the government about the funding options for small businesses.

Richard Prime, Co-Founder & Co-CEO of Sonovate comments: “The wider economic situation across the UK is putting businesses of all sizes under immense financial pressure, and the inability to access the cash flow they need is exacerbating the issue tenfold.

“With banks increasingly unable to offer the level of support that businesses need, there is a significant opportunity for fintechs to step up and provide alternative finance options that will prove critical to keeping many organisations afloat. We’ve seen this demand first hand – to date, we have already provided over £4 billion in funding, and expect the need for on-demand funding to continue to soar with reduced appetite from banks to provide finance to the UK’s innovative SMEs.”

Sonovate was set up as a challenger to traditional funders, and provides businesses – from start-up to enterprise – with on-demand invoice financing. The tech platform delivers swift credit decisions, same-day funding, credit insurance and collection services as well as timesheet and workflow automation, empowering companies to concentrate on expanding their business, confident that processes and funds are in place to help meet payment deadlines. Since it started funding in 2014, Sonovate has lent over £4 billion to 3,300 businesses and 40,000 workers in 44 countries.