Andrea Reynolds, CEO of Swoop Funding, warns that traditional credit scoring models are locking innovative UK startups out of funding opportunities. Despite a record number of active businesses, the outdated scoring system fails to account for modern entrepreneurial needs, particularly for early-stage companies. As new businesses continue to face funding barriers, the push for reform becomes increasingly urgent.
The UK’s entrepreneurial spirit remains strong, with a record number of businesses operating in the country. However, despite the influx of new startups, hundreds of thousands of innovative companies are being excluded from critical funding.
According to Andrea Reynolds, CEO of Swoop Funding, traditional credit scoring models are outdated and ill-suited to assess the risk profiles of modern startups, creating a significant barrier for entrepreneurs trying to access the financial resources they need to grow.
Startups are locked out of funding by outdated credit scoring
Despite a thriving business landscape, with 846,000 new companies launched in 2024 alone, UK startups continue to face a growing challenge in securing funding. While the number of active businesses in the UK has reached 5.6 million, the traditional credit scoring systems often leave these new businesses unable to access financial resources.
As Andrea Reynolds, CEO and founder of fintech platform Swoop Funding, points out, “It’s never been easier to launch a business, yet it’s never been harder to fund one. We’re seeing brilliant founders excluded from finance not because they lack potential, but because they don’t fit outdated scoring models built for another era.”
“Whilst we’re starting to see more awareness and support with regards to funding startups through the newly announced Backing Your Business scheme, there’s still not sufficient awareness of these funding options, and much of the time, they’re fragmented processes.”, adds Andrea.
The problem stems from the fact that existing credit scoring models are heavily biased toward established businesses with long financial histories and stable cash flows. These models often fail to consider the unique characteristics and needs of early-stage startups. According to Andrea, the traditional models fail startups by categorising them as high-risk or even “unscorable” due to their lack of established financial data, leaving innovative companies without access to necessary funding.
The challenges of traditional credit scoring models
Andrea explains that the typical business credit scores are designed for companies with established financial histories, making them ill-suited for startups. “Current credit scoring models are often inherently biased towards more mature businesses and do not adequately reflect the unique needs and risk profiles of modern startups,” she says.
For years, these credit models have relied on behavioural factors, such as payment history and legal issues, as well as financial indicators, including debt-to-asset ratios. However, these measures simply don’t work for startups.
“While this works well for mature firms, it completely fails for new and early-stage businesses that haven’t yet built up that kind of footprint,” Andrea adds. This has led to what is referred to as a “thin-file” or “no-file” problem, where startups are unable to get a credit score due to a lack of financial data, even though they might be incredibly promising businesses with strong potential.
The limitations of innovation in credit models
While progress is being made with innovations in AI, open banking, and alternative data sources—such as real-time bank data, utility payments, and social signals, Andrea warns that these solutions are still in their infancy. Despite offering a more comprehensive picture of creditworthiness, these new tools are still struggling with data quality, transparency, and potential biases that could further disadvantage startups.
Andrea explains, “While advancements in AI and alternative data are emerging to provide a more holistic view of creditworthiness, issues of data quality, transparency, and the potential for new forms of bias still exist.” Until these problems are addressed, startups will continue to find it difficult to navigate the funding landscape.
Empowering startups with a new approach to credit
Andrea stresses the importance of taking proactive steps to improve a startup’s credit profile, especially for new founders. “It’s never too early for a business to build its credit profile,” she advises. Practical steps include opening a business bank account, registering a company phone number, and applying for business credit cards or establishing credit lines with suppliers.
She also highlights the Startup Loan Scheme, a government-backed initiative that offers low-interest loans and access to mentorship, as a vital resource for entrepreneurs looking to secure funding.
However, Andrea also emphasises that a shift in mindset is necessary for startup founders, particularly those from underrepresented backgrounds. Many entrepreneurs still view borrowing as a personal debt issue, which she argues is a major barrier. “There is a world of difference between getting a loan for a car or a holiday and borrowing capital that will give you a return when invested in your business,” she says.
Building a credit system that supports startups
Andrea concludes by calling for a systemic change in how credit scoring models operate. If the UK wants to support entrepreneurship and spur economic growth, it needs to rethink its approach to business financing. “If we want to support entrepreneurship and fuel economic growth, we need a funding infrastructure that recognises potential, not just paperwork,” Andrea says.
Key changes Andrea suggests include:
Using real-time business performance data rather than just historical records
Developing separate lending models for pre-revenue businesses
Rewarding founder behaviour and growth signals
Rebuilding trust in borrowing as a tool for growth
She argues that businesses shouldn’t just be measured by their financial statements but by their capacity to grow and innovate. With the right support and a reformed credit system, the UK can unlock the potential of its startups and secure the economic benefits they promise.
About Swoop Funding
Swoop Funding is a leading business funding and savings platform that empowers businesses to discover the most suitable funding solutions, including loans, equity finance, and grants. It provides a seamless, one-stop platform to help companies find the best funding options and make savings across various services.
Swoop works with over 1,000 funding providers, ranging from mainstream banks and alternative lenders to venture capital funds, angel investors, and grant agencies. With its vast network, Swoop ensures that businesses, whether early-stage or mature, can access the financial resources they need to grow and succeed. Whether seeking debt funding, equity investment, or grants, Swoop has the right solution to match the unique needs of each business.
Shikha Negi is a Content Writer at ztudium with expertise in writing and proofreading content. Having created more than 500 articles encompassing a diverse range of educational topics, from breaking news to in-depth analysis and long-form content, Shikha has a deep understanding of emerging trends in business, technology (including AI, blockchain, and the metaverse), and societal shifts, As the author at Sarvgyan News, Shikha has demonstrated expertise in crafting engaging and informative content tailored for various audiences, including students, educators, and professionals.
