Why SME Credit Is Still Broken

The problem is underwriting, not appetite

The lazy explanation is that lenders don't want to serve SMEs. That's not what I see. Capital is available. What's missing is a way to underwrite a business that doesn't have three years of audited financials, a credit bureau history that means anything, or a finance team to assemble a file.

So the industry substitutes proxies. Collateral. The founder's personal credit score. A relationship with a branch manager. Each proxy is a filter that screens out good businesses along with bad ones, and nobody measures the good ones it lost.

Better underwriting isn't a smarter model on the same thin data. It's finding data that already exists and nobody has bothered to use, transaction flows, invoices, card spend, the operational exhaust of a business actually running.

Credit is a distribution problem too

Even with perfect underwriting, you have to reach the business. This is the part I underestimated before I worked in payments.

An SME owner is not shopping for credit products. They're running a shop, chasing a payment, closing books at 11pm. A loan that requires them to discover you, evaluate you, and then complete a fifteen-step application is a loan they will not take, no matter how good the rate is.

The credit that wins is the credit that shows up where the business already is, at the moment the need appears. That's why cards, payments rails, and embedded flows matter so much here. They aren't a feature of the product. They are how the product gets to anyone at all.

What I've stopped believing

I used to think the hard part was building the model. Three years around payments changed that. The hard parts, in order: getting the data, getting distribution, and only then the model.

I've also stopped believing that "SME" is one segment. A two-person trading business and a forty-person manufacturer share a label and almost nothing else, different cash cycles, different risk, different reasons to borrow. Any product that treats them as one customer will be mediocre for both.

The bar I hold

If a business that deserves credit can't get it from us, that's our failure, not theirs. Most of what I work on is closing that gap, one narrow segment at a time, and being honest about which businesses we still can't serve yet.