Alternatives to Commercial Lending in the SME Business Market

This project intends to study the characteristics of debt finance and lending markets within and outside the UK to identify market failures in the UK system and potential changes that could ameliorate or eliminate these flaws for businesses, and especially SMEs.

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Summary & aims

It is often reported that SMEs struggle to secure financing from traditional banks, which may prioritise larger businesses.

The project will analyse international evidence and compare it to that of the UK in order to understand more thoroughly the differences in models of lending (commercial and noncommercial), including incentives under which agents operate and which affect their lending decision and allocation of resources.

This work will be complemented by engaging with market participants and specialists, each of whom can provide guidance on, and insight into, lending systems structures, relevant outcomes, and necessary policy changes. By using this information alongside the review of studies and datasets, we will gain an informed view about whether unaddressed market failures in the UK system exist and, if so, which outcomes (e.g. SME survival rate, investment rate, innovation, support to firms during downturns, long-run growth, regional and firm heterogeneity) are being affected


We will initially undertake a literature review prior to engaging with market participants to gather their views on this topic. Following this we will take an econometric approach; designing a model for counter-factual analysis.

Principal Investigator


Benjamin Caswell
Senior Economist
Sophie Kitson
Assistant Social Researcher
Carol Vincent
Associate Research Director - Education and Skills
Jagjit S Chadha
Domiziana Turcatti
Senior Social Researcher