Europe Lending

Supporting Small Businesses: How Alternative Lending can Help SMEs Weather the Covid-19 Storm

The Covid-19 pandemic has been a challenging time for everyone, putting particular strain on the UKs SMEs. With a second Lockdown, things aren’t looking good for these small businesses. 

Scott Donnelly is the CEO of CapitalBox, a leading European Fintech SME lender, and understands the situation currently faced by the countries small businesses. CapitalBox aims to provide SMEs across Europe with fast and easy working capital, helping them to grow their businesses and improve their communities.

Here Scott explains how alternative lending could help support SME’s in these unprecedented times.

Scott Donnelly, CEO, CapitalBox

Even during the best of times, running a small business is not easy. Since March nearly 100,00 SMEs have closed their doors permanently and thousands are struggling to survive as a result of the second wave. As economic uncertainty continues, the lack of confidence among Europe’s entrepreneurs worsens. Now is the time to offer small businesses as much support and optimism as they can get.

Keeping businesses afloat and stabilising cash flow, have become top priorities for SMEs, taking a toll on progressive and growth opportunities such as technological advances and the employment of new staff.

As we enter the gruelling second wave, businesses need to understand where they can access finance to get them through the winter months. Turning to traditional banks, which notoriously do not lend to small business due to risk, has little success. However, leaning on alternative lenders can offer a lifeline. Now is the time for the financial services sector to come together to tackle the dark cloud held over the SME community.

Using challenge as an opportunity to learn

Given the latest news and the global economic backdrop panic and negativity seem to dominate the news cycle and business sentiment, but I believe that innovative alternative lenders can be a reliable ally to help SMEs through these challenging times.

It may come as a surprise, but recessions are known to be fertile ground for business innovation. Some of the most famous and successful businesses of all time, including Microsoft, Uber and Burger King were founded during some form of economic downturn. It may sound counter-intuitive, but successful entrepreneurs can learn a lot more from challenges than they do from success. Navigating economic headwinds involves agility, creativity and courage, thereby adding to an entrepreneur’s problem-solving toolkit and instilling the kind of business discipline that will continue to reap benefits long after the cycle has recovered.

For most small businesses Covid-19 is the largest challenge they have had to face. But amid all threats, some companies have found ways to forge ahead through new commercial opportunities. Take Stitch & Story, the online crafts firm with 11 full-time employees, selling materials and offering tutorials to teach people how to knit. From a kitchen table start-up to huge growth the business has recently seen an 800% increase in sales.

Helping SMEs to weather the storm

Small and medium-sized businesses make up 99% of all EU businesses. They drive growth, provide employment opportunities and the create of new markets. These essential SMEs today need our help and support.

The current pandemic has caused many financial markets to grind to a halt, resulting in businesses struggling to keep their heads above water. Small and medium businesses tend to be the worst affected due to their smaller equity cushions and heavy reliance on a steady cash flow.

Due to increased regulation, gone are the days that you could walk into a bank and easily get a loan for your small business. Over the last 10 years banks have had to tighten their belts and reduce their SME exposure to stay compliant with their own capital requirements.

Individually most SMEs don’t require millions in lending – which also means they are low priority since most banks can’t process these small loans efficiently with their legacy processes. They basically just aren’t worth the trouble.

Despite the introduction of measures by the UK government to help boost lending to small business, such as the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme (CBILS), there is still a huge gap in funding. Recent records show 769,137 applications have been made, yet only 608,069, worth £18.5bn, have been approved. Delaying the process further, technical glitches, errors and delays have meant that thousands of SMEs are still waiting for their loans.

Without access to the right funding, small businesses will not grow, and some will not survive which can lead to higher unemployment and a possibly a recession. It is critical that small businesses have the ability to weather the current storm and be ready to grow quickly once life normalizes again.

Riding out the second wave

Unfortunately, hardship for our SMEs doesn’t stop at difficult business loans. The impact of a second wave of the pandemic is sadly going to end in the closure of many small businesses. SME owners are in fact more concerned about the second wave of Covid-19 than they are the impact of Brexit – which let’s not forget is also around the corner.

From lockdown, to freedom, to back into lockdown. The current climate is constantly evolving at a rate that small businesses need quick and accessible financing. As applications from small businesses soar, we have seen how traditional lenders are taking months to process requests. As a fintech ourselves, we have the technology to speed up these processes. With a hybrid AI and human decision-making platform, after a simple 5-minute application, SMEs can look to borrow up to £250,000. The time it takes from application to having the money in the bank can vary between 2 to 3 days – this speed is critical to the future of SMEs and their survival through dark times.

From the economic turmoil of WW2, to the 2008 recession small and medium businesses have made it through and, they will do so again. They will thrive as the backbone of our economy once more. This time alternative lenders are here to support entrepreneurs in their darkest times.


  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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