What London Founders Get Wrong About Business Finance
The London startup scene runs on equity. Pitch decks, cap tables, dilution calculations: for most early-stage founders, raising from angels or VCs is the default mental model for getting capital into a business. That focus has a blind spot.
Debt-based business finance is a different proposition. No equity, no institutional backing required, and it can often be arranged within days. Yet fewer than half of UK SMEs were using any form of external finance in 2024, according to the British Business Bank’s Small Business Finance Markets Report 2025. For many founders, the problem isn’t a lack of need. It’s a lack of exploration.
Going Straight to the Bank Is Usually the Wrong Move
When founders do think about debt finance, most go straight to their business bank account. That’s understandable, but it’s also where applications most often stall.
Bank loan approval rates for SMEs sit at around 44%, according to data from the BVA BDRC SME Finance Monitor. Asset finance approvals, by comparison, reach 96%. The product you apply for, and the lender you approach, changes the outcome more than most founders expect.
The picture shifts further when you consider who is actually doing the lending. Sixty per cent of SME lending now comes from outside the main high street banks, according to UK Finance. Challenger lenders, specialist finance providers, and broker-facilitated products have reshaped the market. Founders who only approach their current account provider are working with a fraction of what’s available.
The Main Product Types Worth Knowing
Most founders are aware that business loans exist. Fewer have a working understanding of the full range of options, and that gap costs time and money.
Business loans, secured or unsecured, are the most familiar product. Unsecured loans can complete in 24 hours and give businesses a fixed capital injection without using assets as security. Secured options typically offer larger amounts and longer terms, and may be more accessible where the credit profile is limited.
Asset finance works differently. Rather than borrowing a lump sum, the funding is tied directly to the asset being purchased, whether that’s equipment, vehicles, or machinery. Because the asset provides its own security, lenders take on less risk. That is why approval rates are so much higher than for standard loan products, and why it is often the right starting point for businesses acquiring physical assets.
Invoice finance solves a different cash flow problem. If the business is generating revenue but clients are paying on 30, 60, or 90-day terms, invoice finance releases that tied-up working capital without waiting for invoices to clear. For growth-stage businesses with strong order books but variable cash timing, it is often a cleaner solution than a term loan.
Revolving credit facilities sit at the more flexible end of the range, scaling with business activity rather than fixing repayments at a set monthly amount. For businesses with seasonal or irregular income, the predictability of a standard loan can create pressure rather than relieve it.
What Lenders Actually Look At
One of the most persistent misconceptions is that a thin credit history or limited trading record makes debt finance unavailable. It often does not.
What lenders assess varies significantly by product. Asset finance is primarily secured against the asset being purchased, not the borrower’s wider credit profile. For newer businesses, this can make it substantially easier to access than an unsecured loan. Invoice finance is secured against outstanding receivables, so a business with solid client invoices may qualify even if the accounts do not yet show consistent profitability.
The other factor that trips up applications is approaching lenders one at a time. Each hard credit search can affect your credit profile, and lenders do not always publish their criteria in advance. Going direct, unless you already have a strong existing relationship, tends to be slower and less efficient than working with a specialist who already knows which lenders will consider which profiles.
Why 69% of Lending Goes Through Brokers
That figure comes from the British Business Bank: 69% of lending to smaller businesses by surveyed lenders is arranged through commercial intermediaries. The number reflects how the market is structured, rather than personal preference.
Speaking to a specialist in business finance before approaching lenders directly can save significant time and protect your credit profile in the process, particularly if your business is early-stage or your circumstances fall outside the standard criteria.
Gary Hemming, Commercial Lending Director at ABC Finance, noted: “A lot of founders come to us having already spent weeks with a bank that was never the right fit for their situation. The right lender depends on the type of business, what the money is for, and how the company is structured. A specialist can identify that quickly, rather than the founder learning through trial and error.”
ABC Finance has been arranging business and commercial finance since 2000, working across business loans, asset finance, invoice finance, and a range of related products for UK businesses at different stages of growth.
Getting the Timing Right
Some products move quickly; others do not. Unsecured business loans can complete in 24 hours. Asset finance typically takes a few days to a couple of weeks. More complex secured facilities require longer. If funding is needed to move on a specific opportunity, factoring that lead time into the decision matters.
The other timing question is whether to raise debt finance before or after equity. The two are not mutually exclusive. Many businesses use debt finance to extend their runway without further dilution, or to fund capital expenditure that equity simply is not the right tool for.
Equity is not the only path to growth for a London startup. The range of debt-based options has expanded considerably, approval rates vary significantly by product, and the majority of lending is now arranged outside the high street. Understanding the options before you need them, rather than in a hurry, is where most founders would benefit most.