How fintech can be an ally to small businesses after the Labour budget

As the UK settles down after the announcement of the recent Labour government budget, small businesses may be feeling the squeeze. With banks pulling back on lending in response to rising living costs and soaring interest rates, many small business owners are looking for alternative financial support. On top of that, National Insurance contributions are set to jump to 15%, and the National Minimum Wage is rising, further tightening the belt.  

Enter fintech. Traditionally viewed as a toolbox for driving efficiency, fintech is now stepping up as a powerful ally, offering innovative lending solutions that could make all the difference.  

The retreat of the traditional bank  

Just earlier in November, the Bank of England announced cuts to interest rates to 4.75%, in the second reduction this year. However, this is not to say that lending has become easier. In fact, H&T, Britain’s largest pawnbroker, has reported a surge in small business owners, including shopkeepers and builders, pledging personal jewellery and watches just to obtain loans.  

It’s clear that small businesses and their owners were already feeling the pinch, and in light of the recent budget, there remains a need for alternative avenues through which businesses can access the capital they need. Whether it’s to navigate the new swathes of regulations or to invest in future growth, every dedicated business owner deserves the opportunity to thrive beyond simply covering basic expenses and paying staff.  

So, what does it look like? 

Instead of enduring a lengthy application process with traditional banks, fintech lending firms provide flexible, fast, and accessible lending options that banks simply cannot match. By using advanced algorithms and analysing real-time data to assess creditworthiness, these firms can offer tailored loan solutions within minutes - ideal for businesses that may not have planned for certain short-term opportunities but need to act swiftly when they come up. 

Fintech solutions can also provide a streamlined process that allows small businesses to focus on their operations rather than getting bogged down in red tape. For example, fintech’s usually have a deeper understanding of the unique challenges faced by small businesses. This is because, by using sophisticated data analysis, they can evaluate not just credit scores but also elements like cash flow, customer behaviour, and even social media engagement. This deep-dive assessment holds unparalleled value compared to the limits of services that banks can offer, allowing businesses to go beyond just taking more cash but providing them with a view on investing in new technology, hiring more staff, or better managing operating costs. 

The rules still apply  

The Labour budget also introduced new regulatory changes that small businesses will need to navigate. The Business Asset Disposal Relief (BADR), formerly known as entrepreneurs' relief, will see changes over the next few years. Additionally, the government has committed to delivering Making Tax Digital for Income Tax (MTD IT), which will require businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter using compatible software. Upcoming mandates like PSD3 and DORA will also add layers of compliance, particularly around licensing, fraud, and digital resilience. While many of these regulations aim to improve processes and consumer protection, they can also be daunting to get to grips with.  

Fintech lenders ease the pressure in other areas, offering a quicker, more flexible solution, helping small businesses access funds and open up time to navigate these new challenges efficiently. 

Global perspectives  

Looking beyond the UK, the global fintech movement is gathering momentum too, with regions like the Middle East, South America, and Asia embracing fintech advancements. Latvia in particular stands out in this mix;  of the 600 active startups in Latvia, around 25% are in the fintech sector, making it the most prominent vertical. As an early entrant into the peer-to-peer lending market within the Baltics, Latvia has also given rise to companies like Twino and Mintos.   

By simplifying access to capital and freeing up time to navigate the evolving regulatory landscape, fintech is not just filling a gap; it’s providing a lifeline for small businesses eager to adapt and grow. For small business owners, partnering with fintech lenders means unlocking opportunities to invest, innovate, and ultimately drive economic growth - exactly what the Labour budget aims to achieve. The rise of fintech solutions like lending isn’t just about helping businesses survive; it’s about empowering them to compete on a larger scale, spur innovation, and drive new ideas that benefit all of us, regardless of the ruling government.