One in three UK SMEs who sought access to finance were denied in the last year, resulting in an estimated £3.6 billion lost in potential funding, according to research from Open Banking platform Yolt.

Research conducted by Opinium for Yolt among 500 senior leaders in UK SMEs found that 111 had been unsuccessful in their attempts to access funding in the last 12 months.

The study found that the average SME sought to borrow £331,275 in financing to help grow their business.

However, on average, small businesses managed to borrow approximately £50k less than this.

The interviews revealed that business leaders are seeking to raise similar amounts in financing in the coming year, at an average of £332,289, with a specific focus on investing to help grow their business including new equipment (36 per cent), product development (21 per cent) and improved technology (17 per cent).

For small businesses denied funding, the research found that key reasons included the age of their business (31 per cent), levels of existing business debt (22 per cent) andlack of sufficient collateral (20 per cent).

Medium-sized businesses, those with 50-250 employees were the most likely to be refused for funding, with 56 per cent experiencing issues with raising finance.

Even for successful candidates, the process of borrowing money via traditional means was rarely seamless, according to the research.

One in five SMEs (20 per cent) described the process of borrowing as easy and less than 10 per cent felt the process was low effort or utilised technology to integrate with their systems to give the most reliable result.

The survey found that in order to improve the application process, SMEs are open to using technology to refine the borrowing process.

Two out of three SMEs (66 per cent) are willing to securely share their bank account data to improve their chances of borrowing money.

Nicolas Weng Kan, chief executive at Yolt, said: “SMEs represent the foundation for a thriving economy, in the UK they represent 99 per cent of all private sector businesses; as such, it’s important we nurture SME growth. Traditional borrowing, limited as it is, can make access to finance difficult. This can impede growth and make it hard for small businesses to achieve their true potential.

“We can see a clear desire from small business leaders in our research to use the power of their data and insight to allow for more accurate decisioning when it comes to borrowing money; Open Banking is the solution to this.

He added: "By employing Open Banking technology, lenders can get a clearer picture of a business’ behaviours and can then provide financing with far more confidence: it’s not about taking on extra risk but accessing a great level of insight. This technology also makes the application process quicker and automated, allowing for efficiencies on both sides.”

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