The Medium-Sized Business Funding Gap Is Real. Open Finance Can Fix It.

Shawbrook Bank has done the industry a service with its latest research report, The M Agenda: The Medium-Sized Business Gap. The headline numbers are striking, but they will not surprise anyone who has spent time inside the commercial finance market. What the report does is put hard data behind something that practitioners have known for years: medium-sized businesses are being systematically failed by the lending system.

The question is what to do about it.

What the Shawbrook Research Actually Shows

The report surveyed firms with between 50 and 249 employees -- the segment that sits in the middle of the SME classification and, according to Shawbrook, acts as the "engine room" of the UK economy. The findings are uncomfortable reading.

Sixty-three per cent of these businesses do not align with traditional lending criteria. Nearly two-thirds feel they are too large for small business products and too small to access corporate facilities. Sixty-five per cent struggle to source appropriate financial support. Only 19% believe their current lender genuinely understands their business.

That last figure is the one that should concern every lender operating in this space. After years of relationship banking rhetoric, fewer than one in five mid-sized businesses feel understood by the institution they already bank with. That is not a communication problem. That is a structural failure in how credit decisions are made and how lenders engage with growing businesses.

The ambitions are not in question. Given access to better funding, 29% of respondents said they would expand into new sectors, 27% would accelerate existing growth plans, and 26% would invest in infrastructure. This is a segment actively looking to deploy capital. The constraint is not appetite. It is access.

Why Traditional Lending Keeps Failing This Segment

I have worked in commercial finance for three decades. The reason mid-sized businesses fall through the gap is straightforward: mainstream lenders build products for volume. Small business lending is increasingly automated against simple credit bureau data and turnover thresholds. Large corporate lending involves dedicated relationship teams with sector specialism. The middle ground -- businesses generating several million pounds in revenue, with complex working capital needs, multiple trading entities, and growth trajectories that do not fit a standard scorecard -- gets processed through criteria designed for someone else.

The Shawbrook data bears this out. Among those whose funding needs are not being met, 32% say they cannot access sufficient capital and 32% say the products on offer are too generic. These are not marginal complaints. They are the core failure mode of a credit market that rewards conformity over complexity.

The irony is that many of these businesses are excellent credit risks. They have traded through difficult conditions, built real revenue, and accumulated assets. What they lack is a lender capable of reading that picture accurately and quickly.

The Open Finance Opportunity

This is where the conversation needs to move forward. The Shawbrook report identifies the problem with precision. What it does not fully address is how technology -- specifically open banking and open finance -- changes the cost and accuracy of solving it.

Open banking, now embedded in UK financial infrastructure through the Open Banking Implementation Entity, allows lenders and platforms to access a business's transactional data in real time, with the business's consent. This is not a minor improvement on paper-based accounting. It is a fundamental shift in what a lender can know about a borrower within hours rather than weeks.

For a medium-sized business with 18 months of live banking data, open banking provides a granular view of revenue seasonality, supplier payment behaviour, debtor cycles, and cash flow stability that no three-year set of filed accounts can match. The scorecard problem does not disappear, but the data available to build a better one improves dramatically.

Open finance extends this further. Where open banking covers payment accounts, open finance encompasses a broader range of financial data: invoice finance facilities, asset finance agreements, pension data, and investment accounts. For a growing business with a layered capital structure -- revolving credit, asset finance, invoice discounting -- open finance allows a lender or an intermediary platform to build a genuinely complete financial picture.

This is not a future prospect. It is available now. The businesses that understand how to present their financial position through open data will access capital faster, at better terms, than those relying on traditional application processes.

Where FundingSearch Fits

FundingSearch was built to solve a specific problem: the mismatch between what UK SMEs need and what they can find. The platform connects businesses with a curated panel of commercial finance brokers and lenders across nine asset classes, from business loans and bridging finance through to invoice finance, asset-based lending, and commercial mortgages.

The Shawbrook report found that 71% of mid-sized firms are now actively considering specialist or alternative lenders. That shift represents a genuine market movement, not a trend. The businesses Shawbrook surveyed have concluded that mainstream lenders are not built for them. They are right.

What FundingSearch adds to that picture is structure. Finding a specialist lender is one problem. Knowing which specialist lender is appropriate for your specific sector, facility type, covenant position, and funding timeline is another. Presenting your case in a way that gets to the credit quickly is a third. That is the matching and navigation problem the platform is designed to solve.

The integration of open banking into the application journey accelerates every stage of this. A business that connects its banking data through FundingSearch's open banking layer gives the relevant lenders a real-time view of trading performance from day one of the enquiry. No chasing management accounts. No waiting for the accountant's sign-off. The credit conversation starts with evidence, not estimates.

The Right Response to This Research

The Shawbrook report is an honest piece of market intelligence. Neil Rudge, Shawbrook's Chief Banking Officer, is correct when he says that mid-sized businesses need "more than just capital -- they need speed, deep sector expertise, and hands-on support." But speed and expertise do not materialise through goodwill alone. They require infrastructure: the data infrastructure to assess accurately, and the market infrastructure to find the right lender in the first place.

If you are running a business with 50 to 250 people and you have read those statistics and recognised your own experience in them, you are not alone, and the situation is not fixed. But the tools to navigate it have improved substantially. Open banking means your financial performance can speak for itself. Specialist lenders are actively competing for your business. And platforms that connect the two are removing the information asymmetry that has kept mid-sized businesses underfunded for too long.

The funding gap is real. The means to close it are available now.

Phillip Evans is the Founder and CEO of FundingSearch.com, a UK commercial finance platform connecting SME borrowers with brokers and specialist lenders. He has 30 years of experience in commercial finance.

Source: Shawbrook Bank, The M Agenda: The Medium-Sized Business Gap (2026). Read the full report.