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Posted: Fri 16th Oct 2026
7 min read
Many small business founders rule themselves out of funding before applying, but what’s stopping them and how can access to finance be improved?
“I have often thought I should be applying for funding, but there are so many hoops to jump through, and I then make the assumption that I don’t qualify.”
A member sent us that last week when we asked whether they’d ever thought about applying for funding but not done it. She had already ruled herself out before anyone else had the chance.
She is far from alone: Allica Bank’s research found that the share of UK small businesses applying for external finance has fallen from 65% in the late 1980s to 25% in 2022 to 2024.
Over a similar span, loan rejections have gone from between 5% and 10% to around 40%.
The same research puts the UK’s application rates among the lowest the OECD has recorded, and its business investment rate the lowest in the G7.
So, fewer founders ask, and more of those who do hear no. It’s tempting to read that as a lack of ambition – but our members tell a different story.
“I don’t know where to start, and it’s not an easy thing to search online,” one founder with a new product told us. Another called it “like finding a needle in a haystack”, and said she’s wary of companies that charge you before they’ll help you find a grant.
A third said the “grants” she sees advertised on Instagram often turn out to be loans at high interest with no break in payments.
Ann Lowe, head of PR and communications at Spice Kitchen, told us what would have helped most.
Founders need “clear information about what’s available, who it’s for and what applying actually involves”.
Spice Kitchen has never taken out a business loan. But a handful of small grants arrived at exactly the right moment, including one during COVID that helped it employ young people from disadvantaged backgrounds in the Liverpool region.
Her point wasn’t that grants beat loans. It was that support works when it fits the stage the business is at.
One founder told us she applied for a local authority grant of around £2,000. She was asked for extensive financial documents and forecasts, and then had to pitch to an online panel that was already running late.
The scheme had first excluded home-based businesses and sole traders, until a friend challenged it. She got the money. But her verdict was that the system should be “proportionate to the amount of money requested”.
Jill Poet, who has watched this from many angles, put it more bluntly:
“It is often much easier to get £50,000 than £5,000!”
Sometimes a £2,000 loan or an overdraft is all a business needs, and that, she says, can be almost impossible to find.
A founder living with a disability told us the same thing:
“Some of us just need a £5,000 to lift us to the next step.”
Adviser Amanda Vine has helped founders with loans, Innovate UK grants and investment.
She says the length of applications, the detail asked for and the lack of feedback after a rejection put people off. With loans, she adds, being personally liable for repayments is “a lot of pressure for people to take on”.
For a small business, the time and effort involved in applying can be a significant barrier in itself. When the amount on offer is relatively small, the process can feel disproportionate to the potential benefit.
The Responsible Finance 2026 Impact Report shows what CDFIs did in 2025. They lent £181.4 million to start-ups and small businesses across 6,869 loans, and gave more than 36,000 hours of business support.
Six specialist CDFIs also lent to 113 people through microloans of up to £5,000, averaging £2,567. That is the size of loan our members keep telling us they’re struggling to find.
And 88% of the businesses CDFIs lent to had already been declined by another lender. Yet just 2% of CDFI business customers in 2025 came to them through a bank referral.
Many declined founders are never pointed to the lender that might have said yes.
CDFIs are not short of demand either. The report says that “demand has long outstripped the capital CDFIs have available to lend”.
So, awareness alone isn’t enough. Founders need to know the route, and the route needs to be funded.
We think there is a real opportunity to showcase CDFIs and to introduce them to more of our small business members across the UK.
Not every founder who holds back lacks confidence. A hospitality founder told us the wrong funding, from the wrong people, at the wrong time can be worse than no funding at all.
For her, the sweet spot is “right people + right time + clear purpose + trust”. She wants a funder who brings more than capital.
And many do not see themselves in the picture. One solo director told us the grants on offer go to businesses that want to hire people and take on premises.
She doesn’t want a training programme. She wants investment that helps her “see if our ideas have legs”.
When I spoke to Enterprise Nation members earlier this year, one word kept coming up: trust.
Women, disabled and diverse founders told me the same thing. They want to see more people like them getting funded, and too often funding doesn’t reach the founders who are hardest to reach.
If founders can’t see businesses like theirs being funded, or struggle to find a source of finance they trust, they may decide not to apply at all. That means potentially good ideas never get the chance to prove themselves.
None of this calls for reinvention. It calls for easier navigation, proportionate applications and a more joined-up approach.
Here are the three things that would make the biggest difference:
Teach the route, and make it one route
Every founder should be able to find, in minutes, what is available, whether they qualify and what applying involves. Every postcode should know its local CDFI. When a bank declines a founder, there should be one referral standard that sends them on, not away.
Size the process to the ask
Small amounts should need small applications. Sole traders and home-based businesses should be eligible by default. Every unsuccessful applicant should get feedback. CDFIs should have the capital and capacity to say yes more often.
Build trust locally, and measure it in the open
Deliver through partners founders can actually meet, with advice alongside the money. Then publish who applies and who is funded, by place and background, and keep that picture current.
The founders who wrote to us are asking for a fair chance to find out if their idea has legs.
Funders with long-term money and the power to bring people together can help most by paying for the plumbing: the advice, the local delivery and the data, alongside the capital.
Thank you to every member who shared their story; these stories cannot be told without your support.
