News & Insights

Access to financing remains one of the biggest hurdles for European small and medium-sized enterprises (SMEs). Despite forming the backbone of Europe’s economy, many SMEs still face significant challenges in securing timely and affordable loans. Traditional lending practices often make it unprofitable for banks to serve smaller-scale and shorter-term financing needs in time. As a result, many SMEs are underserved, despite their high demand for financing, essentially resulting in higher rates of bankruptcy. 

In a new whitepaper titled The State Of European SME Lending, INNOPAY — in collaboration with Zurich-based fintech Teylor — explores why this gap has persisted for so long. However, it also signals that the SME lending landscape is transforming. The report highlights three key trends that are reshaping access to SME financing:

1. Technological innovation: AI, machine learning and open banking APIs speed up data collection, analysis and credit decision-making, allowing digital-savvy lenders to offer faster, more user-friendly lending experiences.

2. Alternative capital providers: Private debt funds are expanding their financing tools into the SME segment, providing quicker approvals and serving SME segments that traditional lenders deprioritize.

3. Embedded lending: Financing is increasingly integrated into everyday business software operating systems, making it more accessible and convenient for SMEs while challenging bank’s traditional interaction channels.

The whitepaper also discusses the strategic choices traditional lenders face — from building in-house capabilities to partnering with fintechs — and why timely innovation is crucial to avoid disintermediation.