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Today, around 99% of all businesses in Britain are classified as small and medium-sized enterprises (SMEs), employing around 61% of the private sector workforce. However, despite their vital role in the UK economy, many small and medium-sized businesses are struggling.
A recent survey shows that the number of small businesses in Britain has fallen from 5.9 million in 2020 to 5.5 million today. Many businesses are feeling the pressure of increased operating costs, the slow recovery of revenues and, crucially, the ongoing struggle to secure financing.
Addressing these financing challenges is essential to helping SMEs survive and grow, and fintech solutions are having a real impact in this area. PayPal, for example, has stepped in to address a £2.5 billion funding gap that UK small businesses have faced over the past decade. PayPal working capital solution. With its flexible approach, PayPal Working Capital offers SMEs a fast and flexible way to access the capital they need, based on their sales history.
Traditional financing options can pose obstacles for small businesses
The traditional UK lending system can pose challenges for smaller and newer businesses, with extensive documentation, long approval times and strict lending criteria creating barriers for SMEs. For example, in April 2024, the Treasury Committee reported that small businesses are facing “unnecessarily tougher” conditions due to restrictive measures by banks and regulators, which could prevent them from securing vital funds.
The Federation of Small Businesses (FSB) has also raised concerns about declining financing success rates. Before the pandemic, 65% of SMEs were able to secure financing, a figure that dropped to 61% in 2023. As a result, companies looking for reliable financing are increasingly turning to fintech options as a more accessible and flexible alternative. According to research by Sonovate in 2023, four in ten small and medium-sized businesses will prefer fintech lenders over regular banks when seeking business financing.
Fintech solutions offer SMEs alternative financing options
From managing cash flow to purchasing inventory, investing in technology or upskilling staff, SMEs depend on financing to support their growth. Fortunately, fintech solutions like PayPal Working Capital offer SMEs alternative financing options that are easy to apply and manage.
SMEs need modern financing solutions that fit the realities of running a small business, and options like PayPal Working Capital offer an attractive alternative. Unlike traditional business loans from banks, PayPal Working Capital offers financing based on an SME’s PayPal sales history. This allows companies to borrow up to 35% of their annual PayPal revenue without having to demonstrate extensive financial forecasts. The application process is quick and easy and the money is available quickly.
Additionally, with PayPal Working Capital, small businesses can choose the percentage of their PayPal sales that will be dedicated to repaying the advance, so it can be tailored to the business’s cash flow needs. Refunds are tied to daily sales, meaning companies pay more when they have high sales and less during slower periods. With one fixed amount, entrepreneurs are freed from ongoing interest charges and have a clear picture of the total repayment costs, so that they are not faced with unpleasant surprises.
How can fintech solutions help your business grow?
Since its founding in 2014, PayPal Working Capital has distributed £2.5 billion to 58,000 UK businesses across a range of sectors. From fashion to auto parts, these cash advances have enabled small businesses to thrive in today’s challenging economic landscape3. Nine in ten (91%) of these companies have said their revenue has increased or remained stable as a result of the funding they received.
The London Candle Company is one of the companies that has benefited from PayPal Working Capital. The London Candle Company, a small business focused on selling high-quality, competitively priced candles in bulk to businesses in the hospitality and hospitality industries, benefited from PayPal Working Capital’s innovative refund approach.
“PayPal Working Capital has been so helpful when I needed to stock up on bulk candles for the busy winter months, especially as I needed to pay my suppliers straight away,” explains Founder and Managing Director Jonathan Welland. I also found it simple and easy to use because you choose the percentage of your sales that you pay as a retainer. Cash flow is still coming in, but you’re only losing some of it. And before I know it, it’s paid for.”
Small business owners in the UK like Jonathan are already making the most of fintech models, which are rapidly transforming the traditional lending sector. Could your company be next? Discover more information about PayPal working capital and enable the expansion of your business.