Propel Finance Raises $2 Billion to Fund UK Small Businesses – PYMNTS.com

Report on SME Financing and its Alignment with Sustainable Development Goals

Introduction: A Strategic Funding Initiative for Economic Growth

A recent funding round has been secured to enhance the provision of asset financing to Small and Medium-sized Enterprises (SMEs) in the United Kingdom. This initiative is designed to directly support key objectives outlined in the Sustainable Development Goals (SDGs) by empowering businesses to invest and expand.

• The primary mission is to enable thousands of SMEs to access finance for business-critical equipment and vehicles.
• This investment is a direct catalyst for achieving SDG 8 (Decent Work and Economic Growth) by fostering productivity, efficiency, and job creation within the SME sector.
• By facilitating the acquisition of essential assets, the funding also promotes SDG 9 (Industry, Innovation, and Infrastructure), helping businesses modernize and grow sustainably.

The Challenge: Financial Exclusion as a Barrier to Sustainable Development

The new financing arrives at a critical time, as many small and micro-businesses face significant hurdles in securing credit, a problem that directly impedes progress towards the SDGs. The primary obstacle identified is the inability of lenders to verify the basic corporate and financial data of these smaller entities.

• Data from a PYMNTS Intelligence report indicates that nearly one-third of micro-business credit applications in the U.S. and U.K. are rejected due to data verification failures.
• This systemic issue creates a significant disparity, with micro-enterprises facing a loan rejection rate five times higher than that of larger corporations.
• This financial exclusion represents a major challenge to SDG 10 (Reduced Inequalities), as it systematically disadvantages smaller enterprises, preventing them from competing on a level playing field and contributing fully to the economy.

Analysis of SME Vulnerability and Economic Impact

The difficulty in accessing finance contributes to the high failure rates observed among small businesses in both the U.K. and the U.S., undermining economic stability and hindering the achievement of SDG 8.

Key Statistics on Business Failure Rates:

1. United Kingdom:
   • Micro-enterprises constitute 95% of all businesses and employ 30% of the workforce.
   • The business “death rate” sees 20% of small businesses fail within their first year, and 60% close within three years.
2. United States:
   • Only 25% of small businesses remain operational for 15 years.
   • Nearly half cease operations within their first five years.

These high rates of failure, often stemming from a lack of capital, lead to job losses and economic volatility, directly contradicting the goals of sustainable economic growth and decent work for all.

Conclusion: Accessible Finance as a Cornerstone for Achieving the SDGs

Initiatives that provide accessible and flexible finance are crucial for strengthening the SME sector, which is the backbone of the economy. Addressing the funding gap for these businesses is not merely a commercial objective but a fundamental requirement for advancing the global development agenda. Supporting SMEs directly contributes to the following Sustainable Development Goals:

1. SDG 8: Decent Work and Economic Growth – By empowering businesses to invest, expand, and create stable employment opportunities.
2. SDG 9: Industry, Innovation, and Infrastructure – By enabling SMEs to acquire the modern equipment and technology necessary for enhanced productivity and innovation.
3. SDG 10: Reduced Inequalities – By ensuring smaller enterprises have equitable access to the financial resources needed to survive, thrive, and compete with larger firms.

SDGs Addressed in the Article

SDG 8: Decent Work and Economic Growth

• The article focuses on the financial challenges faced by small and medium-sized enterprises (SMEs) and micro-businesses, which are crucial for economic growth and job creation. It highlights that a new funding round for Propel aims to help “thousands more businesses to access the finance they need to invest in business-critical equipment and vehicles – the tools that drive productivity, efficiency, and growth.” This directly supports the goal of sustaining economic growth. The article also notes the high failure rates of small businesses in the US and UK, indicating a threat to stable employment and economic vitality.

SDG 9: Industry, Innovation, and Infrastructure

• This goal is relevant as the article discusses providing asset financing for SMEs to “invest in business-critical equipment and vehicles.” This investment is a form of upgrading industrial capability and infrastructure for small-scale enterprises. The core problem identified is the lack of access to finance, which hinders the ability of these businesses to innovate and modernize, a key aspect of SDG 9.

Specific Targets Identified

SDG 8: Decent Work and Economic Growth

1. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation…
   • The article supports this target by mentioning that the financing will enable businesses to “invest in business-critical equipment and vehicles – the tools that drive productivity, efficiency, and growth.” This investment is a direct means of technological upgrading to boost productivity.
2. Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.
   • This is the most central target. The entire article revolves around the difficulty SMEs and micro-businesses have in “getting funded” and a new initiative to provide “accessible, flexible finance solutions.” The text explicitly states that “almost a third of micro-business applications for bank credit in the United States and the United Kingdom are turned down,” directly addressing the challenge of access to financial services for SMEs.

SDG 9: Industry, Innovation, and Infrastructure

1. Target 9.3: Increase the access of small-scale industrial and other enterprises… to financial services, including affordable credit, and their integration into value chains and markets.
   • The article directly addresses this target by highlighting the high credit rejection rates for micro-businesses and the mission of Propel to offer “asset financing to small and medium-sized enterprises (SMEs).” This focuses squarely on increasing the access of small-scale enterprises to financial services and credit.

Indicators for Measuring Progress

• Proportion of micro-business credit applications rejected: The article explicitly states, “Almost a third of micro-business applications for bank credit in the United States and the United Kingdom are turned down.” This can be used as a direct indicator to measure access to finance.
• Ratio of credit rejection rates between micro-enterprises and larger enterprises: The article provides a comparative metric, noting that “micro-enterprises face a rejection rate that’s five times higher than for larger enterprises.” This serves as an indicator of inequality in financial access.
• Business survival/failure rates: The article provides specific data points that can be used as indicators of the health of the SME sector.
  • In the U.S., “Only 25% remain open for 15 years, and nearly half close their doors after five years.”
  • In the U.K., “a fifth of all small businesses fail inside their first year — what U.K. officials call the business ‘death rate’ — while 60% shutter within their first three years.”
• Proportion of total employment in micro-enterprises: The article mentions that in the U.K., micro-enterprises are “employing 30% of all workers,” which is an indicator of the economic importance of this sector.

Summary of SDGs, Targets, and Indicators

Source: pymnts.com