Every few years a minister stands up and promises to back British small business. The press release lands, the photo gets taken, and the founders who actually needed the money carry on getting turned down. Matt Haycox, the entrepreneur and investor who has lent over £1 billion to UK businesses, has watched this cycle for most of his working life, and his read on it is simple. The funding gap is not a puzzle nobody can crack. It is a problem the system has quietly learned to live with.
Across more than 100 companies he has backed, Haycox has sat on both sides of the table, the one writing the cheque and the one chasing it. That is what makes his frustration worth hearing out, because it is not the complaint of someone who has never been in the room. He has approved the deals other lenders walked away from, and he has watched what those businesses went on to do.
The gap is bigger than the announcements suggest
The Federation of Small Businesses has reported that the share of small firms successfully accessing credit has fallen, with many owners no longer bothering to apply because they expect a refusal. The British Business Bank has made a similar point in its own research, noting that a large number of viable businesses never approach a lender at all, put off by the assumption that the answer is already no.
That quiet withdrawal is the part the headlines miss. The gap is not only the businesses that get rejected. It is the much larger group that stopped asking, who decided the process was not worth the bruising and went without the capital that would have let them grow.
“Most of the founders I meet aren’t uninvestable,” Haycox says. “They’ve been told no so many times they’ve given up. That isn’t a confidence problem you fix with a motivational speech. It’s a market that has stopped doing its job.”
The businesses that fall through the cracks
The frustrating part, for Haycox, is which businesses get caught in the gap. They are rarely the hopeless cases. More often they are companies that look wrong on a form and right in reality.
A business can be profitable, growing and full of orders and still fail the box-ticking exercise because it is asset-light, or because it operates in a sector a credit committee has quietly decided to avoid. A founder can have a decade of trading history and get turned down because the last twelve months included one rough quarter. The model rewards businesses that look tidy on paper, and plenty of good businesses are messy on paper precisely because they are growing.
“I’ve backed businesses that three banks had already said no to, and they went on to do brilliantly,” Haycox says. “Not because I’m cleverer than a bank. Because I actually looked at the business instead of the form. The form misses the thing that matters.”
Why the usual fixes miss
When government does act, the money tends to flow through the same institutions that created the bottleneck. Capital gets announced at the top and thins out before it reaches the businesses on the ground. The criteria stay rigid, the process stays slow, and the founder who needed working capital this quarter is still waiting two quarters later.
Haycox argues the design is backwards. The people deciding who gets funded are rewarded for avoiding losses, not for backing growth. So they lean towards the safe, the established and the already comfortable, and they label the rest too risky to bother with.
“Banks don’t lose their job for saying no to a good business,” he says. “They lose it for saying yes to a bad one. So they say no to anything that doesn’t fit the box, and the box was built for an economy that doesn’t really exist anymore.”
What it actually costs
The bill for this lands on the real economy. The Federation of Small Businesses has long warned that late payment alone pushes tens of thousands of small businesses to close every year, a problem made far worse when those firms cannot bridge the gap with affordable finance. A company with a full order book can still go under because the cash arrives later than the wages are due.
This is the part Haycox keeps coming back to. The funding gap is not abstract. It is a founder covering payroll on a personal credit card because the system that should have helped decided they were not worth the paperwork. Multiply that by every town in the country and the cost is not just a list of dead companies. It is the jobs, the growth and the tax those businesses would have produced if the money had reached them in time.
What founders can do while the gap stays open
Waiting for policy to close this is not a plan. Haycox’s advice is to stop treating the high street bank as the only door, and to understand what a lender actually wants before walking in. The alternative finance market has grown precisely because the mainstream left so much room, and a founder who knows where to look has more options than they did a decade ago.
Most rejections, in his experience, come down to a founder who cannot clearly show how the money turns into more money. The business might be sound, but the case for it is a mess. Fix the case, and a lot of doors that looked shut turn out to be ajar.
“Funding is a sales job,” he says. “You’re selling a lender on the idea that giving you money is a good decision for them. Most founders walk in talking about what they need. The ones who get the yes walk in showing what the lender gets back.”
Founders who want a straighter route to capital can explore alternative business funding options through Haycox’s own platform.
The honest conclusion is not a comfortable one. Nobody with the power to close this gap has a strong enough reason to do it. The incentives that built it are still firmly in place. Until that changes, the businesses that get funded will be the ones that learn to ask better, prove it faster, and stop waiting for permission that was never coming.
