Why UK SMEs are waiting months for a bank to say no

FBX Capital Group, the London debt advisory business that comprises FBX Capital Partners and Funding Bay, has reported revenue growth of 54 per cent in a year in which it arranged more than £143 million of funding for UK SMEs. Total funding arranged rose from £96.5 million to £143.4 million, the client base grew by 57 per cent to 570 businesses funded, and headcount went from 44 to 52 with a target of 65 by the end of 2026.

Alex Fenton, a partner at the group, answered written questions from Disrupts on what is driving that growth. His account separates two pressures that are often run together, tighter bank lending criteria and higher borrowing costs, and argues that the businesses moving fastest towards alternative finance are the ones for whom a delayed decision costs more than a higher rate.

Fenton described the growth as "a multitude of things all coming together at once", but the first of them is the banks. "Traditional lenders have become more cautious, so when a business spots an opportunity or hits a cash-flow squeeze, it can be waiting months for a decision that may still be a no. That gap has widened, and demand for what we do has widened with it."

The second is the shape of the funding need itself. Industry, and AI in particular, is moving faster than the traditional lending process was built for. A business may be operating in a new, unproven sector, acquiring a competitor, refinancing under time pressure, managing a seasonal cash-flow requirement or investing to deliver a new contract. "In those situations, a lengthy or rigid process can be as much of a barrier as the cost of finance itself," he said.

FBX has responded by broadening its debt advisory work across asset-based lending, cash-flow loans and venture debt, supporting M&A, management buy-out and buy-in transactions, refinancing, growth capital and working capital, with a sector-agnostic client base that includes technology, retail, manufacturing and healthcare. The benefit, in Fenton's description, is not simply more funding options but the ability to structure a facility around a business's actual circumstances: its cash flow, asset base, growth plans, transaction timetable and wider capital structure.

Criteria, not cost

Asked how much of the shift to alternative finance is down to tighter bank criteria as against higher borrowing costs, Fenton was clear that they do different jobs. Higher rates affect affordability across the whole market, alternative lenders included, "so they are not necessarily what drives businesses away from banks".

"Traditional lenders have become more cautious about who they will lend to, while approval processes can also be slow. This means a viable and profitable SME may struggle to secure bank finance because it falls outside increasingly rigid lending criteria or may simply be unable to access funding quickly enough when an opportunity or cash-flow need arises."

That is the gap alternative finance fills, "not necessarily because it is cheaper, but because it offers greater flexibility, faster decisions and funding structures better suited to the business". Cost still shapes what SMEs choose, he added, with more of them looking for shorter-term or flexible facilities that can be drawn and repaid in line with trading rather than large fixed commitments.

Who moves first

The fastest movers are the sectors with lumpy, working-capital-heavy cash flows: manufacturing, construction, retail and hospitality. Manufacturers and construction firms carry long project cycles and pay for materials and labour well before they are paid themselves; retail and hospitality feel seasonality sharply and need funding that flexes with demand rather than a static term loan.

Alongside them sit businesses that are fundamentally sound but do not tick conventional boxes: those growing fast, those that have had a bumpy trading period, or those with assets a bank struggles to value. Healthcare and technology are in the mix too, usually for growth or acquisition rather than survival. "The common thread is timing," Fenton said. "These are companies for whom the cost of a missed opportunity, or a delayed decision, means more than a slightly higher headline rate."

On how alternative lenders and advisers assess risk differently, he resisted drawing the line at bank versus non-bank. The best forward-thinking banks, alternative lenders and advisers all start with the business: how cash moves through it, the quality of its order book, the value of its assets, the character and track record of the people running it. The best lenders can look past a temporary dip explained by a one-off event, or take account of forward revenue not yet reflected in filed accounts. "On the other hand, a bank often starts with the score and the historic accounts." FBX's role as an adviser, he said, is "to translate a business fairly to the lender most likely to understand it, rather than pushing everyone through the same narrow gate and hoping".

Data, and its limits

Technology is changing how SME funding is arranged, underwritten and monitored "enormously, though not always in the way the hype suggests". In arranging finance, better access to data, particularly through open banking, can build a current and accurate picture of a business far faster than the document-heavy process it replaces, shortening decisions from weeks to days in the right cases. In underwriting, real-time transaction data shows a lender how a company is trading today rather than many months ago, which for a viable business with strong current trading can mean a fairer assessment. In monitoring, ongoing data feeds allow facilities to be reviewed more often than a single annual check-in, so pressure points surface earlier.

"What I would caution against is treating this as full automation," Fenton said. "Data can make a decision faster and sharper, but it does not replace judgement. The lenders getting it right use technology to see more clearly, then apply experience, sector knowledge and common sense to the decision."

What to weigh before signing

Fenton's advice to an SME choosing between alternative finance and a bank facility starts from the view that the two should sit alongside each other, and that the fastest traditional lenders are already doing this. Beyond the headline rate, the real cost includes arrangement fees, repayment structure, term length and how repayments align with actual cash flow. Fast, flexible funding priced for a short-term opportunity becomes expensive if used to solve a long-term need, and the reverse is also true.

"If it is a matter of timing, speed or a transaction the bank is not structured to support, alternative finance can be an effective solution. But if the underlying financial position is under strain, additional debt, from any provider, may not address the root issue." His standing advice is to seek independent guidance before committing, "whether that is from us or someone else", and he said a good adviser should be prepared to say that a bank facility, or even waiting, is the better option.

Looking 12 months ahead, Fenton expects the shift towards non-bank finance to continue but resists calling it a boom. He describes it instead as a structural normalisation, with alternative finance moving from last resort to a mainstream part of the toolkit that businesses and their advisers consider alongside the bank from the outset. FBX is projecting around 50 per cent year-on-year growth through the second half of 2026.

The development he finds more interesting is blended funding, with businesses combining bank and non-bank facilities rather than treating them as competing options. The risk to watch is quality: "Rapid growth in any lending market can attract less disciplined providers, so borrowers will need to scrutinise cost, terms, security requirements and the provider's track record carefully."