How big is the high-cost loan crisis for small businesses in the UK — and why is no one talking about it?
Up to one in four inquiries reaching community development finance institutions (CDFIs) in the UK now come from small businesses trying to escape unaffordable high-cost loans. The crisis cuts across manufacturing, health, social services and beyond — mirroring the payday lending scandal that consumed households over a decade ago, but this time it is businesses that are trapped.
The structural cause is clear: banks have tightened their criteria around tangible capital — something most small businesses simply do not have — while a £65 billion credit gap has opened up for SMEs. Online lenders have stepped swiftly into that void, offering fast approvals at rates that can start above 60% APR and climb to 300% APR in documented cases. Some businesses have taken out 15 successive high-cost loans, each new one used to cover the unaffordable repayments of the previous, spiralling deeper into debt with every cycle.
The good news is that CDFIs — responsible lenders operating under the Responsible Finance umbrella — can offer an exit route. Bailey Reynolds Maintenance refinanced its high-cost debt through Swig, a CDFI, and went on to save between £80,000 and £90,000 in annual interest, grow its headcount to 54 employees with five new hires, and target £10 million in annual revenue by 2031. Explore the full episode and how the Bank Referral Scheme could accelerate many more stories like this on Listenly.
"Overnight, we were saving £80,000 to £90,000 of interest a year. We could put that onto the bottom line. Rather than being caught in a series of 12-month loans, we could finance over a sensible five-year period."
— David Reynolds, Bailey Reynolds Maintenance, as cited by Eleanor Russell on The Responsible Finance Podcast
Eleanor Russell is the Policy and Research Manager at Responsible Finance, the industry body representing the UK's community development finance institutions. In this role, she leads the organisation's research agenda and policy work, translating data collected directly from CDFI members into analysis that shapes public debate and regulatory discussion around fair access to finance.
Her expertise sits precisely at the intersection of this crisis: she tracks borrowing patterns across Responsible Finance's member network, which gives her a ground-level view of how many small businesses are now arriving at CDFIs not to start something new, but to escape unsustainable debt. The comment piece she presents in this episode draws on that field data, making her one of the very few analysts with direct, aggregated evidence of the scale of high-cost lending among SMEs — a problem that, as she notes, has yet to receive anything like the media and regulatory attention given to payday loans for consumers.
Her analysis connects the structural dots: tightening bank lending criteria, a £65 billion SME credit gap, rising rejection rates, and the rapid growth of online lenders operating with little public scrutiny in the business lending space — all of which she calls out as conditions demanding urgent policy attention.