How technology can support SME lending in the age of COVID-19

SME lending challneges overcome with technology

Anders la Cour, Chief Executive Officer of financial infrastructure provider, Banking Circle, discusses SME lending options in the age of the pandemic, and how technology helps overcome traditional funding challenges.

The COVID-19 environment has brought about a host of new challenges for the UK’s small businesses. Arguably, one of the most pressing being, how to access funds to remain afloat. With a fifth of all UK SMEs predicted to run out of cash during the current crisis, it is an area which needs support, and fast. 

Although banks are doing all they can to help businesses through the pandemic, standard lending solutions and practices are generally not geared towards SMEs, or the current climate. For example, identification checks can take months to complete, and funds distributed to successful applications may take even longer.

In order to ensure the survival of the UK’s SMEs, the backbone of our economy, we therefore need to see the industry change its practices to make financial inclusion and lending for them a priority.

The traditional issues 


For SMEs looking to take out a loan in the current climate, one of the primary issues facing them is the time taken to become verified and accepted. The general industry average for clearing a loan is 60 days, and this is a pre-COVID-19 figure, meaning applications today are likely to be higher (and verification timings longer) than this. 

The key issue is that many traditional banking players simply lack the underlying technology infrastructure required to increase the number of applicants they can process, or the speed in which this can be completed. This means that even if they wanted to ramp up their SME loan support, they are unable to do so.

Faster funding through more flexible tech


To solve these challenges, a shift in focus for banks and payments providers towards a more customer-first approach is needed. This requires legacy infrastructure to be updated or replaced with more modern, flexible alternatives that are better able to meet the needs of the SME.

But, with Euromoney estimating that the total cost of maintaining legacy systems, investing in new systems and paying IT staff amounts to anywhere from 15% to 25% of a typical bank’s annual budget, this is not something many banks can afford – especially in the current climate. As a reaction, we’re therefore seeing an increased shift towards a financial utility model, where financial infrastructure providers like us are supporting banks and payments companies by giving them access to the latest cutting-edge technology that enables them to focus on better serving their end customers.


Read More: Compete on culture rather than salary, tech start-ups told


Importantly, this enables banks and payment providers to come up with innovative solutions for SMEs, knowing they now have the underlying technology to execute it. This can include lending propositions that are built and designed with the flexible requirements of the modern-day small business in mind; enabling the ability to calculate loan requirements, receive confirmed offers (and then funds) in just a matter of hours.

This flexibility; such as being able to repay money based on cashflow, is extremely important for SMEs. Especially at a time where their income is extremely likely to be significantly lower than normal.

A road to greater financial inclusion


SMEs have traditionally found it harder to become as financially included as their larger peers. The current environment however provides a great opportunity for the payments and banking industry to evolve this position.

There are 5.9 million SMEsin the UK, and losing even just a small proportion of these over the next few months could significantly hinder the wider economy. It’s therefore in everyone’s interest that the technology processes are in place to ensure that a business, no matter its size, has the ability to apply for, and access funds to keep its operations going. And this should not just apply to the current COVID-19 environment, but become standard industry practice. 


Anders la Cour

Co-founder and Chief Executive Officer of Banking Circle, Anders la Cour previously worked as a technology and financial M&A lawyer at a tier one law firm in Copenhagen.

The Future of Smart Buildings: Trends in Occupancy Monitoring

Khai Zin Thein • 12th June 2024

Occupancy monitoring technology is revolutionising building management with advancements in AI and IoT. AI algorithms analyse data from IoT sensors, enabling automated adjustments in lighting, HVAC, and security systems based on occupancy levels. Modern systems leverage big data and AI to optimise space usage and resource management, reducing energy consumption and promoting sustainability. Enhanced encryption...

The need to weave agility throughout the business

John Craig Swartz SVP at POWWR • 11th June 2024

With geopolitical tensions, more extreme weather events and the legacy of a global pandemic, it is more difficult for energy suppliers to preserve their margins and remain competitive than ever before. To thrive in the current climate, it is imperative that a supplier makes marginal gains wherever they can. Profitability within the sector today hinges...

Artificial general intelligence is closer than expected

AI expert Stuart Fenton • 10th June 2024

Whilst most of the attention around artificial intelligence (AI) thus far has been on ChatGPT, it is just the tip of the iceberg. In many ways, ChatGPT shouldn’t be thought of as true AI as it is – at its heart – just generative, learned behaviour. The future of AI, in contrast, is a system...

The State of Data Streaming

Confluent • 06th June 2024

Confluent survey: 90% of respondents say data streaming platforms can lead to more product and service innovation in AI and ML development 86% of respondents cite data streaming as a strategic or important priority for IT investments in 2024 For 91% of respondents, data streaming platforms are critical or important for achieving data-related goals

The State of Data Streaming

Confluent • 06th June 2024

Confluent survey: 90% of respondents say data streaming platforms can lead to more product and service innovation in AI and ML development 86% of respondents cite data streaming as a strategic or important priority for IT investments in 2024 For 91% of respondents, data streaming platforms are critical or important for achieving data-related goals

Grant Funding Awarded to Advance Cancer Therapeutics Discovery

Dr Alan Roth • 04th June 2024

The CRUK (Cancer Research UK) Scotland Institute and Oxford Drug Design, a biotechnology company with core expertise in AI drug discovery, have announced that their joint application for the MRC (UK Medical Research Council) National Mouse Genetics Network (NMGN) Business Engagement Fund has been awarded.