Serving the underserved

Banks want to see trading history, predictable revenue, and tangible assets. Instead, early-stage businesses may have R&D pipelines, grant backing, and product roadmaps. That mismatch is why most innovative firms can't access the capital they need to scale.

Small and medium-sized enterprises account for 60% of UK employment and generate £2.8 trillion in turnover. Despite this importance, SMEs – especially those led by underserved groups – still struggle to find appropriate finance. Here's why that happens, and what's starting to change.

What SMEs contribute to the economy

Globally, SMEs represent about 90% of all businesses and over half of all employment. In some economies, they account for up to 70% of GDP. These aren't marginal players – they're the engine.

In the UK, women-led businesses contribute £221 billion in gross value to the economy. Ethnic minority-led businesses add another £25 billion annually; equivalent to the entire chemical industry's contribution.

That's substantial economic impact from segments that have historically faced the most barriers to access to finance. And it shows that it isn't some sort of niche or boutique concern. 

Underserved entrepreneur type	Proportion of the UK business population
Female	15%
Disabled	8%
Ethnic minority	7%

SMEs create jobs, drive innovation, and stabilise regional economies by offering employment opportunities beyond major urban centres. They're often at the forefront of innovation because of their agility and ability to adapt quickly to market changes.

SMEs provide a platform for women and young entrepreneurs, promoting economic participation across demographics. In many regions, women own a significant percentage of SMEs, which helps drive inclusive growth.

If we want broad economic uplift in the UK beyond just London, then SMEs (particularly those led by women and ethnic minorities) are an essential part of any strategy. 

What banks want vs what businesses have

Traditional lenders aren't set up to back early-stage innovation. It's not that they don't want to – it's that their models don't allow for it.

They need to see last year's balance sheet looking solid. Most early-stage companies building something genuinely new don't have any of that yet. You might have government grants approved and a strong team in place. But the product isn't live yet, so the metrics don't match the lending model.

That's not what banks underwrite against. So the answer is usually no, not now, or come back when you're further along.

According to the government's small business access to finance review, banks find it difficult to value and lend against IP assets. They prefer tangible collateral like buildings or equipment. That adds cost and complexity for IP-rich companies, especially those without a sufficient pool of physical assets.

The British Chambers of Commerce notes that traditional bank lending remains especially hard to secure for newer firms, those without collateral, or with thinner trading histories. The problem is multiplied for female or minority ethnic-led businesses.

Here's the reality: if you haven't been trading for ten years, capital is hard to find through traditional channels. Meanwhile, banks face their own constraints – shareholders to appease, risk thresholds to manage, increasing regulation to navigate, and expected returns to meet.

The risk-reward calculation for a £500,000 loan to an early-stage tech company just doesn't work when they could spend the same time underwriting a £5 million facility for an established enterprise.

Why non-bank lenders haven't solved it at scale

Most non-bank lenders want to help, but they don't have the funds to solve the problem at scale.

Even with £100 billion available, deployment would be limited by size and reach. You need infrastructure, expertise, and risk management capabilities that take years to build. That's left a gap. 

According to the World Bank, there's a £5.7 trillion finance gap across 119 emerging markets and developing economies. That's equivalent to 19% of GDP. Globally, 40% of formal micro, small and medium enterprises are credit-constrained. For women-owned businesses, the gap is £1.9 trillion.

The numbers tell you one thing: access to finance remains the single biggest barrier to SME growth. But numbers also tell you where the opportunity is.

Why this matters for the next decade

Over the next ten years, an estimated 1.2 billion young people will reach working age globally. Only about 420 million jobs are expected to be created. That leaves hundreds of millions without a clear path to employment.

Expanding access to finance for SMEs is essential to enable private investment, productivity growth, and stronger local economies. When innovative companies can't access capital, innovation stalls. Growth slows. Opportunities disappear.

But when you can unlock that capital, the opposite happens. You create jobs. You drive productivity. You build companies that solve real problems.

What actually works for growing businesses

Innovative businesses need funding solutions that account for the way growth actually unfolds, not how it looks on last year's balance sheet. If your plan involves building ahead of revenue, you need a lender who gets that.

A lender who understands that R&D pipelines have value. That grant backing de-risks certain types of spend. That a clear roadmap with realistic milestones tells you more than three years of trading history sometimes can.

You need credit facilities that adapt to your cash flow, with repayment schedules that match the way revenue actually comes in. Milestone-based drawdowns that let you access capital when you need it, not when it's convenient for the lender's reporting cycle.

How we're delivering the solution

Nighthawk's lending approach is designed around the realities of growing a business in the UK. We provide venture debt and flexible financing to back ambitious companies with the capital structures they need to scale.

We focus on companies doing real innovation. The kind that often ask why banks can't support them – and deserve an honest answer that goes beyond "come back later".

Since 2023, we've provided over £41 million in funding, supporting more than 500 businesses across multiple sectors. We've backed companies with solid R&D pipelines, government grants approved, and strong teams in place – even when the product wasn't live yet.

31% of our loans have gone to female-led businesses. We're on a mission to improve SME access to finance year on year, enabling wider investment, innovation, and productivity, particularly among underserved segments.

Our solutions for growing companies

• Venture debt - For Series A-C companies looking to avoid excess dilution. Our flexible venture debt offering doesn't require a VC sponsor. That means you can unlock the capital you need without the added dilution. Focus on growth, increase your valuation, and lower your cost of funding.

• Grant loans - Then comes the headache of financing it. We can help you unlock 80% of your grant upfront, giving you the working capital to complete the project on time. Your grant funds the repayment when it comes through - you just get the cash flow you need now.

• R&D tax credit loans - Spending on innovation can be costly, and your tax credits can take time. We can pay 80% of your tax credit upfront so you can focus on the things that matter. No waiting for HMRC to process the claim.

• Export finance - In partnership with UK Export Finance, you can access non-dilutive funding to increase your runway, accelerate your growth, and boost your export revenue.

  
  

Next steps

If your plan involves building ahead of revenue, if you're doing real innovation that doesn't fit neatly into a traditional lending model, if you need capital that works with how growth actually happens – not how it looks in retrospect – we should talk.

We're backing ambitious founders building the next generation of innovative businesses. The ones who've been quietly working for years, waiting for the world to catch up. The ones with strong R&D pipelines and clear roadmaps who just need capital that understands what they're building.

Get in touch to discuss how we can support your growth →