Entrepreneurship should be about the strength of an idea and the resilience of the founder. But for some entrepreneurs in the UK, the path to starting a business is blocked not by a lack of talent, but by factors like having been out of work for a long time, not having any savings, or having a thin or low credit score.
“I didn’t have any income coming in. I’d been out of work for a year, so I couldn’t get funding. Business Sheffield introduced me to Purple Shoots. They understood my situation and background…It’s enabled me to have a livelihood. We started up, employed people and are looking to expand.” Ada, a Purple Shoots customer.
To ensure more people like Ada can succeed, Responsible Finance submitted formal evidence to The Maple Review in January. This timely, Government-backed review by Small Business Britain is a critical opportunity to dismantle the barriers to entrepreneurship caused by economic deprivation. With The Maple Review’s publication imminent, we are shining a light on the UK’s ‘on-ramp’ to entrepreneurship – and lesser-known sub-sector of the CDFI world: Microlenders.
CDFIs dismantle barriers to entrepreneurship and open access to finance for those unable to get it, or get it affordably, from other sources; over 90% of the businesses they support each year have been declined by another lender.
Often, microlending CDFI customers have been unemployed and economically inactive for long periods. This could be due to being a refugee, having a disability, having caring responsibilities, or having faced previous hardship through life events. Unfortunately, these are the exact factors that can hamper their ability to access the finance they need to start-up.
- 25% of the UK’s SME business owners are disabled or have a health condition, but they face significant barriers that hinder their growth potential; access to finance is cited as a key challenge for 46% of disabled entrepreneurs[1].
- There are 5.8 million unpaid carers in the UK, and 2.6 million people – 600 a day – have given up work to care[2]. WPI Economics research has found that being out of work is the single strongest predictor of poverty for unpaid carers.
This inability to access appropriate finance is often not about the quality of the business idea, but rather the circumstances and ‘data profile’ of the individual, and the availability of appropriate finance.
They include where founders:
- Have limited savings or assets to act as collateral, including no friends or family who they can borrow from. Most mainstream business loans require some form of security. For individuals in deprived postcodes, who often have no property or savings, this creates an immediate barrier.
- Have thin or poor credit scores, which do not pass online algorithm-based lending models. A lower credit score due to a single missed bill from three years ago or a period on benefits can trigger an automatic rejection, regardless of the current viability of the business or business idea.
- Do not have formal education or financial skills, including a lack of awareness about options for borrowing. Microbusinesses may be led by first-time, part-time or necessity driven entrepreneurs who lack confidence in navigating finance.
“Refugee entrepreneurs face severe financial insecurities which derail their financial success. This is a significant barrier among our refugee entrepreneur community: two thirds of our borrowers would struggle to pay a £100 bill.” – Skylight Ventures
CDFIs provide an ‘on-ramp’ solution for these entrepreneurs, driving inclusive economic growth. They close gaps and areas of market failure that even the British Business Bank’s fantastic Start-Up Loans Programme cannot fill. Through their lending and wraparound support, they ensure microbusinesses – particularly those run by founders facing economic disadvantage – can flourish, by:
- Reaching into communities through local presence and trust.
- Providing human underwriting, including supporting entrepreneurs to complete financial forecasts and business plans.
- Supporting entrepreneurial success through community and mentoring.
- Providing no and low-interest loans to ensure borrowing is affordable.
Community and Mentoring: Trust Leeds’ Be Your Own Boss Programme
Microlender Trust Leeds runs a free, 12-week initiative designed to empower unemployed and under-employed individuals to pursue self-employment. The programme blends practical business readiness training with a unique Self-Reliant Group model that fosters a peer support network. Beyond the initial weekly workshops and professional mentorship from business coaches, the programme ensures long-term sustainability through its “Business Coffee Club,” focusing on building the confidence, financial literacy, and social capital necessary for participants to break the cycle of poverty and overcome financial exclusion.
Through their work, CDFIs have significant impact. They:
- Enable economic reinsertion and pathways out of poverty, facilitating sustainable economic transition from state-dependency to tax-contributing self-employment.
- Support wealth building in communities through a ripple effect of economic activity that benefits the whole community.
- Create the bank customers of the future by acting as an ‘on ramp’ for microentrepreneurs and small businesses being established.
- Unlock significant fiscal savings for ex-offenders by preventing re-offending.
- Support vulnerable cohorts and social justice, giving people the tools to create an independent, sustainable income.
- Enable ‘flexi-employment’ for those whose health prevents traditional 9-to-5 employment, but who possess significant skills and economic potential.
“The loan was incredibly helpful for both my business and personal life. It provided the initial capital I needed to start selling my products on eBay and Etsy. It truly changed my life, giving me a sustainable way to earn money.” – Ehsan, a Skylight Ventures customer
Despite the huge social impact of CDFIs, significant hurdles remain that prevent microlending from reaching its full potential.
Our vision is for CDFIs to be an embedded part of the finance ecosystem and a vital part of the UK’s long-term economic infrastructure. With widespread support available to microentrepreneurs in all communities, there will be pathways to support businesses earlier, reducing risk upstream, and clear progression routes from microenterprise through to growth finance, generating significant fiscal and social returns. To enable this, our submission to The Maple Review recommended:
- Government backing and incentivising CDFI-Bank partnerships, enabling CDFIs to become a more formalised, integral part of the financial ecosystem.
- Promoting philanthropic funding for microlending through Corporate Social Responsibility and high net-worth individuals.
- Creating a loan guarantee scheme tailored for microloans under £25,000.
- Encouraging referral partnerships for microlending CDFIs to further embed them into the UK’s infrastructure for entrepreneurs, enabling more of them to flourish.
If you are interested in hearing more, please contact Responsible Finance to discuss implementing these recommendations.
[1] The Lilac Review: Final Report. May 2025.
[2] Carers UK. Facts about Carers. October 2025.