Funding for London's small businesses: the essential role of CDFIs
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Posted: Fri 1st May 2026
London is full of small business superheroes. Entrepreneurs running micro, small and medium-sized firms create jobs, opportunities and exciting innovations.
Our capital city thrives because of their employment, tax contributions and what they buy from other businesses.
They're an essential part of the city's business ecosystem, partnering and supporting our bigger firms and organisations, serving our neighbourhoods and providing brilliant products and services with flair and creativity.
So when these small businesses need finance, whether that's to grow or to manage their day-to-day costs, they need lenders who understand them.
But too many fantastic small businesses can't get the funding they need.
Too many feel their experience of finance is "one size fits all", and if they don't fit a standard mould, perhaps skewed towards the needs of larger firms, they're out in the cold.
Traditional finance options were limited when Tuscany and Taste, a brand that introduced London to premium truffle-based products, sought to expand.
In 2025, after five successful years building a loyal following through food markets, events and collaborations, founders Marco and Egizia were ready to open their first physical store. This required significant investment.
To secure the funding they needed, Marco and Egizia turned to BizBritain and met Gary Lennon, who introduced them to Let's Do Business Finance, a Community Development Finance Institution (CDFI).
What are CDFIs?
CDFIs are social enterprises that exist to close gaps in access to finance.
There are around 50 in the UK and they have a huge impact, backing thousands of businesses every year through a relationship-based approach to finance.
They provide affordable, flexible business finance, offering loans from less than £5,000 to more than £250,000 for starting or growing a business.
CDFIs don't have shareholders and don't exist to make a profit.
They specialise in supporting businesses and people who can afford to repay a loan but struggle to access the finance they need from other sources.
Banks including Lloyds, NatWest and JPMorganChase, the Government, MPs across the political spectrum and business journalists from media like The Times and The Financial Times all recognise the unique and essential role of CDFIs in unlocking opportunities.
Who do CDFIs help?
Many of London's strong and viable businesses still face challenges to accessing the funding they need.
This particularly has an impact on businesses led by women, Black and ethnic minority-led firms, businesses in deprived areas and entrepreneurs with a disability.
For example, 51% of ethnic minority-led businesses and 52% of businesses led by someone with a disability expect to face difficulties in obtaining finance.
CDFIs have operated in the UK for four decades, making fair decisions based on gaining a detailed understanding of what their applicants need and whether they have the ability to repay.
This serves their customers well – they can often lend, at fair and affordable rates, to businesses turned down by other types of lender.
Today, they lend over £300 million per year to people (they offer personal loans too), businesses and social enterprises.
Around nine out of 10 of the SMEs they lend to have fewer than 10 employees.
A similar proportion, about nine in 10 of the businesses that get a CDFI loan, have previously been turned down by another lender, yet most successfully repay their CDFI finance and thrive.
CDFIs lend to:
Hospitality and retail firms.
Manufacturers and makers.
Professional service businesses.
Food and beverage companies.
Lifestyle businesses.
Social enterprises.
And many more types of companies.
They can finance working capital, equipment, business development, expansion and growth, and can even help firms reduce their repayments on higher-interest borrowing.
"High-cost loans can be a drag on UK business growth, funnelling vital capital out of small businesses and stifling investment.
"In 2025, 15% of the total value of CDFI business lending included an element of refinancing.
"By replacing unaffordable loans with affordable, manageable credit, CDFIs allow SMEs to reinvest in their own future."
– Theodora Hadjimichael, CEO of Responsible Finance, which represents the UK's CDFIs
How much could my business borrow?
CDFIs offer business loans from less than £5,000 to more than £250,000.
In 2025, their average loan size to SMEs was £97,694, over an average 4.5 year term.
Some CDFIs are specialist delivery partners for the Start Up Loans scheme – ideal for new businesses with less than 36 months of trading – with an average startup loan size of £12,594 last year.
Other CDFIs specialise in smaller "microloans" which turn "kitchen table" ideas into micro enterprises and enable people to move into self-employment.
Pros and cons of debt finance
Debt finance can be one of the most flexible ways to fund a business. It can help you manage cash flow or grow without giving up a stake (any "equity") in your business.
It can also give you a track record of successful repayments, building confidence in working with partners.
After repaying their loans, many CDFI business customers go on to secure future finance from banks or other investors, building on their positive experience with a CDFI.
Of course, loans come with an obligation to repay them. Some CDFI loans are unsecured (requiring no personal guarantee or collateral) and others are secured.
While CDFIs can often say yes when other lenders can't, they won't lend if it looks like your business can't afford the repayments.
Benefits for London SMEs
Many entrepreneurs think finance isn't for them. They know that their balance sheet isn't as strong as they'd like it to be, or they can't offer a lender security, like collateral or a personal guarantee.
Others are despondent if a lender has declined them, which could simply be because they don't fit a certain risk profile. None of these circumstances have to be an automatic barrier to getting finance.
Because of CDFIs' structure and ability to take the time to understand a business' potential, they can often say yes when other lenders can't.
They're not-for-profit, so they always act in applicants' best interests, highlighting any other options available. That means there's really nothing to lose in approaching a CDFI to see whether they might be able to help.
CDFIs are transparent about the price of their loans – in fact, Responsible Finance is calling for other lenders to raise their game on transparency and catch up with CDFIs.
Their customers also really value the thousands of hours of free business mentoring and support that CDFIs provide every year.
Can I get the money today?
CDFIs' decisions are made by people, not algorithms – in contrast to online, high-cost business loan providers, which can make rapid decisions but are typically much more expensive.
CDFIs need to take the time to understand your plans and make fair, human decisions.
This relationship-based approach means you should allow the time necessary. It can take anything from a few days to a few weeks to process an application.
It helps if you're well-prepared when you approach a CDFI.
Whether you think you might need urgent short-term finance or want to secure long-term investment, have a clear picture of what you'll use the finance for and how you'll repay it.
Approaching a CDFI
Think about what you want finance for and make sure you understand your business' basic financials.
What's your current trading position?
What will the finance do for your business?
Have you done market research and prepared forecasts?
How will the additional finance create new income opportunities for you?
How will the repayments fit into how you manage your expenses?
CDFIs can help you with all of this and you can ask them for guidance and feedback.
Start your business, steady the ship or scale with confidence
As a different type of lender, CDFIs can often help even when other lenders can't, because of their human approach.
They offer fair, flexible finance, backed by real people who take time to understand your business, and they're authorised and regulated by the Financial Conduct Authority.
They must also adhere to the Responsible Finance Code of Conduct.
Find out more about CDFIs by exploring the resources available with Responsible Finance.
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