Kwabz Oduro Ayim, co-founder of the UK music platform Mixtape Madness, encountered significant challenges securing financing to expand his business, which aims to promote black artists. After initially obtaining an advance loan secured against the company’s music catalogue from a major distributor, Ayim later refinanced through Lendoe, a specialist finance brokerage focused on businesses that struggle to access conventional lending. He described this refinancing as providing a “much more favourable cost of capital,” which helped fuel the company’s growth. Ayim noted, however, that other firms with less robust performance often benefit from networks or social connections that grant them access to cheaper capital.

Raphael Sofoluke, founder of the UK Black Business Show, which operates annual events in London and Birmingham, said that many black entrepreneurs resort to self-funding due to a lack of trust in banks. He emphasized that founders often underestimate the funding they need and face challenges when applying for loans. While he recognized the importance of financial support, he also highlighted the value of advice and guidance for minority business owners.

These experiences reflect broader systemic issues confronting black and ethnic minority-owned businesses (EMBs) across the UK, despite their potential to substantially contribute to the economy. Research conducted in 2023 by the Centre for Research in Ethnic Minority Entrepreneurship (Creme) and NatWest estimated that removing barriers to finance for these businesses could add as much as £75 billion to the national economy.

Monder Ram, professor at Aston University and director of Creme, stressed that improving access to finance should be framed as an economic growth strategy. He pointed to thriving high streets in cities like Birmingham driven by immigrant entrepreneurs, which often go unacknowledged in economic narratives. Data from the British Business Bank (BBB) underscores the ambition of EMBs: 71 percent aim for significant growth compared to 40 percent of white-led businesses. Yet, more than half of EMBs anticipate difficulties securing external finance, a higher proportion than their white counterparts.

A 2025 Lending Standards Board study found that white British-led businesses were three times more likely to have credit card and loan applications fully accepted than ethnic minority-owned businesses. Minority entrepreneurs also frequently face greater financial risk, such as providing personal guarantees.

Ram highlighted that discouragement is a key barrier, with many eligible ethnic minority founders not applying for credit due to fears of rejection. About 19 percent of minority business owners with funding needs reported feeling discouraged from applying, compared with 11 percent overall. Banks, including NatWest and Lloyds, have launched initiatives to engage more effectively with underrepresented entrepreneurs and address these perceptions.

Demi Ariyo, founder of Lendoe, agreed that a “fear of rejection” deters many minority entrepreneurs, who may avoid borrowing early on out of concern over debt. This behavior often results in thin credit files, leaving them without a credit history when they eventually seek funding, which in turn leads to rejection—not explicitly due to ethnicity but due to lack of creditworthiness evidence.

David Olusegun, founder of Mustard Seed Fund I, a venture capital fund supported by the British Business Bank, pointed to particularly acute financing challenges in consumer-focused businesses. While technology startups might leverage tools like artificial intelligence to develop products affordably, consumer businesses often require significant upfront capital.

Specialist lenders are working to close these gaps. Lendoe, for instance, helps minority founders translate their business stories into the financial language lenders understand. Akmal Hanuk, founder of Assadaqaat Community Finance (ACF), a Cardiff-based community development finance institution, noted additional challenges facing entrepreneurs from migrant backgrounds, including language barriers. ACF provides financial support and mentoring to marginalized groups, backing about 200 to 250 businesses annually with loans averaging £3,000 each, achieving a 95 percent repayment rate. Successful repayment can help businesses build credit history for future loans with more mainstream lenders.

Nonetheless, the high cost of capital remains a significant obstacle. Ayim pointed out the paradox that while larger firms enjoy low-cost financing, smaller businesses—those most in need of capital—face prohibitively expensive borrowing costs that complicate repayment and growth.