Today, around 99% of all businesses in the UK are classed as small and medium-sized enterprises (SMEs), employing around 61% of the private sector workforce.Yet, despite their critical role in the UK economy, many SMEs are struggling.

A recent study found the number of small businesses in the UK has dropped from 5.9 million in 2020 to 5.5 million today. Many businesses are feeling the squeeze from increased operating costs, slow revenue recovery and, crucially, the ongoing struggle to secure funding.

Addressing these funding challenges is essential to help SMEs to survive and grow, and fintech solutions are making a real impact in this space. As PayPal Working Capital internal data showed, PayPal has stepped in to address a £2.5 billion funding gap facing UK small businesses in the last 10 years through its PayPal Working Capital solution.

With its agile approach, PayPal Working Capital offers SMEs a fast and flexible way to access the capital they need, based on their sales history.

Traditional funding avenues can present roadblocks for small businesses

The UK’s traditional lending system can present challenges to smaller and newer businesses, with extensive documentation, lengthy approval times, and strict lending criteria creating barriers for SMEs. In April 2024, for example, the Treasury Committee reported that small businesses face ‘needlessly tougher’ conditions due to restrictive measures from banks and regulators, which can hold them back from securing essential funds.

The Federation of Small Businesses (FSB) has also voiced concerns over declining funding success rates. Prior to the pandemic, 65% of SMEs were able to secure funding, a figure that fell to 61% in 2023. As a result, businesses seeking reliable financing are increasingly turning to fintech options as a more accessible and adaptable alternative. In fact, according to research done by Sonovate in 2023, four in ten SMEs prefer fintech lenders over mainstream banks when seeking business finance.

Fintech solutions provide SMEs with alternative funding 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, present SMEs with alternative financing options that are easy to apply and manage.

SMEs need modern funding solutions suited to the realities of running a small business, and options such as PayPal Working Capital present an appealing alternative. Unlike traditional business loans from banks, PayPal Working Capital provides funding based on an SME’s PayPal sales history. This helps to enable businesses to borrow up to 35% of their annual PayPal sales without the need to demonstrate extensive financial forecasts. The application process is quick and straightforward, with funds available fast.

Moreover, with PayPal Working Capital small businesses choose the percentage of their PayPal sales that will go toward repaying the cash advance so it can be tailored to suit the business’ cash flow needs. Repayments are tied to daily sales, which means businesses pay more when they have high sales and less during slower periods. With a single fixed fee, business owners are freed from ongoing interest charges and have a clear view of total repayment costs, meaning no unwelcome surprises.

How can fintech solutions help your business to grow?

Since its inception in 2014, PayPal Working Capital has distributed £2.5 billion to 58,000 UK businesses across a variety of sectors. From fashion to auto-parts, these cash advances have allowed small businesses to flourish in today’s challenging economic landscape. According to PayPal’s Working Capital SMB Survey from July 2024, nine out of 10 (91%) of these businesses have said their revenue either increased or remained steady thanks to the funding they received.

The London Candle Company is one of the businesses that has benefitted from PayPal Working Capital. A small business focused on selling high-quality, competitively priced candles in bulk to businesses in the catering and hospitality industry, The London Candle Company took advantage of PayPal Working Capital’s innovative approach to repayments.

“PayPal Working Capital has been so helpful when I’ve needed to stock up on bulk candles ahead of the busy winter months, especially because I need to pay my suppliers right away,” Founder and Managing Director, Jonathan Welland explains, “I’ve found it simple and easy to use too, as you choose the percentage of your sales that you pay towards the advance – you’ve still got cash flow coming in but you’re only losing a portion of it. And before I know it, it’s been paid.”

Small business owners across the UK, like Jonathan, are already making the most of fintech models, which are rapidly transforming the traditional lending industry. Could your business be next? Discover more information about PayPal Working Capital and empower the expansion of your business.

Any information provided is general only and does not take into account your objectives, financial situation or needs.