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SME lending hits £4.8bn in Q1 – UK Finance

Gross lending to SMEs stood at £4.8bn in the final quarter of 2022, according to data published by UK Finance.

The data, released as part of the latest Business Finance Review, found that the figure for Q4 was broadly unchanged from previous quarter and totalled £22.6bn for the whole of 2021.

Applications for new loans and overdrafts stabilised in the final quarter of the year.

Invoice finance and asset-based lending advances increased by five per cent on the quarter.

The value of repayments edged down on the quarter but remain above pre-pandemic levels and were 38 per cent higher in 2021, compared with the previous year.

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Stephen Pegge, managing director of commercial finance at UK Finance, said: “2021 was another rollercoaster year for SMEs, right to the end. Encouragingly, we have seen the economy recover back to pre-pandemic levels, though some sectors still have a way to go to close the gap.

“Despite the ups and downs of the past year, SMEs’ approach to financial management has been steady. Demand for additional loan finance has stabilised closer to levels seen prior to the pandemic and the value of new lending held up in the final months of 2021. There are signs that alternative forms of finance, such as invoice finance and asset-based lending, have turned a corner in terms of increased demand.

“A good degree of financial flexibility remains. SMEs continue to be able to draw on significant accumulated deposits and have access to unutilised arranged facilities, such as overdrafts, invoice finance and asset-based lending. Meanwhile repayment of the additional finance accessed during the pandemic continues.

“While SMEs will be hoping for more stability this year, a number of challenges will linger, and the finance industry is conscious that these can affect sectors differently. Finance solutions are there for SMEs looking to restart investment plans, boost their working capital or fill a gap if the recovery hits another bump in the road.”

By Stephen Farrell

Source: Insider Media

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SME lending hit £54bn in first three quarters of 2020

Gross lending to SMEs in the first three quarters of 2020 was more than double the annual total for 2019, reaching £54bn, according to data published by UK Finance.

The data, released as part of the quarterly Business Finance Review, shows that the value of lending in the second and third quarters was £36bn, higher than during the same period of 2019, driven by continued uptake of government-backed support.

Nationally, UK lenders have issued 229 Bounce Back Loans Scheme (BBLS) and ten Coronavirus Business Interruption Loan Scheme (CBILS) facilities for every thousand businesses.

Since the extension of government support from November 2020, UK Finance has estimated that £600m of funding has been made available through the topping-up of existing BBLS facilities.

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Approval volumes exceeded 150,000 for construction and retail in the period, and 200,000 for the professional and support services sector. In previous quarters, all industries averaged fewer than 20,000 approvals.

Stephen Pegge, managing director of commercial finance at UK Finance, said: “2020 was a challenging year with the disruption of Covid-19 restrictions and uncertainty ahead of the end of EU transition. The UK’s banking and finance industry continues to support businesses of all sizes across the country to help them trade and invest for recovery.

“Gross lending in the first three quarters of last year was more than double the annual total in 2019, boosted by over 1.5 million businesses borrowing with government-guaranteed facilities totalling over £68bn. SME financing was particularly in demand in the service industries, which were amongst the hardest hit by the pandemic.

“Approvals of overdraft facilities rose significantly at the start of last year but demand in the second and third quarters moved towards loans. SMEs can now ‘top-up’ their Bounce Back Loan to the maximum of £50,000 or 25 per cent of their turnover if lower, with the application deadline for the schemes now running until the end of March 2021. This extension and the wider support of the industry will help businesses access the finance they need as the pandemic continues to affect the economy.”

By Stephen Farrell

Source: Insider Media

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Steepest fall in lending to UK businesses for almost two years

LENDING to UK businesses saw the biggest decline in almost two years in July, the Bank of England has reported.

Net lending to UK firms slid by £4.2 billion over the month, driven by a £2 billion net repayment by businesses to banks.

The significant amount of repayment saw the annual growth rate of bank lending to UK businesses fall to 3 per cent, down from 4.4 per cent in June.

Analysts have suggested the slump in borrowing could be another sign that firms are resisting investment which would need a loan and are hunkering down until there is greater clarity over Brexit.

The decline was most significant among large businesses, where the growth rate of borrowing fell to 4.2 per cent.

Growth of borrowing by small and medium-sized firms (SMEs) was unchanged at 0.8 per cent for the month.

Michael Biemann, chief executive of Selina Finance, said: “SME borrowing rates remained static at 0.8 per cent, which once again underlines the disconnect between the average UK business and the high street.

“These days, high street banks want businesses to jump through all kinds of hoops to secure finance, and so it’s no surprise the number of SMEs turning to alternative sources is on the increase.”

Meanwhile, the new Bank of England figures also revealed that British lenders approved the greatest number of mortgages for two years in July, appearing to highlight greater stability in the housing market following a Brexit slowdown.

The central bank said lenders approved 67,306 mortgages last month, up from 66,506 in June.

The UK housing market has been downbeat since the EU referendum in 2016 but has shown tentative improvements in recent months.

However, earlier on Friday, the latest Nationwide housing survey revealed that annual house price growth ran below 1 per cent for the ninth month in a row in August as consumer confidence remained low.

Source: Irish News

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SME lending hits 2-year high – bullish approach essential to Brexit survival

So says Angus Dent, CEO of ArchOver, following the news that the Bank of England has announced that UK SME lending hit a two-year high in June, despite Brexit uncertainty continuing to escalate.

Dent explained to IFA Magazine why we shouldn’t be surprised to see SME lending go up amidst this uncertainty, and why the FS market needs to follow suit and support UK business.

“The message here is that business must continue as usual, regardless of the Westminster-Brussels psychodrama. Businesses still need cash to invest. New projects still need to launched and new customers still have to be served. The SME market in this country is still pushing for growth, however incompetent its political leaders.

“We shouldn’t be surprised to see business lending at a two-year high. Good debt is good for business. Injecting cash into stable companies is the foundation of economic growth – we need to see more of this bullish approach from business as we approach October 31st. We need to see companies taking control of their own futures with sustainable growth finance – not emulating our perpetually dithering government.

“The question is whether the UK’s financiers will support them. The banks have been routinely turning down smaller companies’ loan requests for years now. They may have low-cost capital in spades, but they’re not letting British SMEs put it to work. Instead, businesses need to look beyond the high street and seek out alternative finance that will treat them with the respect they deserve. SMEs need personalised, flexible finance if they’re to make it through the next six months in one piece.

“It’s good to see our small businesses taking this challenge head on. Now we need to see the financiers following suit.”


Source: IFA Magazine

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Just 11% of business lending is now fixed-rate loans

Just 11% of the £416bn in total stock of loans to businesses are now being provided on a fixed rate – dropping by a third from 18% two years ago.

This leaves businesses with huge exposure to rising interest rates, Hadrian’s Wall Capital, the London-based specialist debt adviser, argued.

The drop came as banks prepared for interest rate rises and de-risked their loan books. Hadrian’s Wall Capital thought this has left businesses dealing with significant uncertainty over their cost of finance and unable to plan corporate finance activity and investment over the coming years.

Marc Bajer, chief executive of Hadrian’s Wall Capital, said: “Now is the time for small businesses to lock in to fixed-rate debt, before interest rates rise again.

“However, fixed-rate loans are now virtually unavailable from banks, and many SMEs are reliant on floating rate debt. Any jump in interest rates could see small businesses burned by their reliance on floating rate loans.

“Corporate finance advisers should also consider fixed-rate debt when it comes to their corporate finance activities, so as to reduce the threat to them and to their clients, of rising interest rates.

“When interest rates rise, small businesses are likely to suffer financial damage – a rise in the base rate to just 1.5% would cost UK small business billions.”

The firm said that fixed-rate loans are now increasingly difficult for businesses to obtain – especially for small and medium enterprises.

The expected further rise in interest rates of 0.25% in the coming months will cost British SMEs another £355m in interest payments in the first year alone.

Data provided by the Bank of England showed that in 2012, the share of all bank loans to businesses had a fixed-rate as high as 49%.

Hadrian’s Wall Capital said the consequences of both the Credit Crisis and the swaps mis-selling scandal has meant that SMEs are now extremely wary of using swap products.

Additionally, SMEs also have great difficulty in obtaining approval from any institution to fix the interest rate on their loans using swaps, removing another layer of protection from rate rises for businesses.

With interest rates now on the rise, there is a risk that SME growth planning and corporate finance activity could be shelved for the present, as businesses choose to wait for less uncertainty over the costs of floating rate debt.

Hadrian’s Wall Capital said it is important to continuously revitalise UK business by giving them un-interrupted access to debt refinancing, MBO’s and MBI’s.

Fixed-rate lending for such corporate finance activities can help to reduce the risk of rising interest rates to these SMEs.

The growing shortage of fixed-rate bank lending to SMEs has led Hadrian’s Wall Secured Investments to focus on providing long term, fixed-rate, non-callable loans to SMEs, giving them intermediate to long-term certainty over their cost of funding.

This enables them to undertake corporate finance transactions and plan long-term programmes of investment in their businesses.

Source: Mortgage Introducer

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National investment bank needed to boost SME lending, think tank says

Britain should set up a state-backed investment bank to focus on small business lending as part of efforts to tackle poor productivity, a think tank has urged.

A new report by Civitas argues that the creation of a new “national investment bank” will address the “market failure” that has led to a lack of long-term investment in SMEs.

The new lender could be independently financed at no ongoing cost to the taxpayer, Civitas claims, while boosting current low levels of investment and helping to raise productivity.

Civitas economist Justin Protts also derided the Government-backed British Business Bank, which he said does “incredibly little” to support business when compared with development banks in Europe, and is “not fit for purpose”.

He added: “The UK economy is not operating as it should. The output of each worker is barely increasing and failure to increase our productivity since the financial crisis has been holding back growth.

“There is no doubt that low investment, particularly in enterprise, is a cause of the UK’s current economic woes and a significant part of that problem is the failure of the banks to lend to SMEs, which make up 99% of businesses in the UK.”

“If the Government is going to seriously tackle the challenges of low investment and productivity then they must go further and create a new UK investment bank which can be mandated to provide the longer-term finance needed by SMEs to invest, grow and increase the UK’s productivity.”

The think tank pointed to figures showing that investment in the UK has fallen from about a quarter of GDP in 1990, in line with other developed economies, to just over 16%, well below that of most advanced countries.

Civitas said this is in large part driven by banks failing to invest in SMEs, even when there is demand from creditworthy businesses, with lenders favouring easier returns from alternative investments.

Loans to business by banks as a proportion of their domestic lending have declined from 31% in 1988 to 8% in 2016, according to the report.

Mr Protts highlighted the success of similar initiatives in Germany and the US.

“The experiences of institutions elsewhere, particularly of Germany’s KfW and the US’s Small Business Administration, show that government-owned investment institutions can play an important role in providing the sort of business investment the UK is lacking and at no ongoing cost to the taxpayer.”

The British Business Bank’s automated phone system did not allow the Press Association to request comment.

Labour welcomed the report, with the party’s shadow chief secretary to the Treasury Peter Dowd saying: “This report… helps build the case Labour has been making for a new National Investment Bank. The creation of this new bank will be crucial for targeting lending at smaller businesses who are being let down by our current financial system.

“Labour is committed to setting up a new National Investment Bank alongside a network of regional development banks to build a high-wage, high-productivity economy.”

A Department for Business, Energy and Industrial Strategy spokeswoman said: “This Government’s Industrial Strategy is building a Britain that invests in the skills, industries and infrastructure of the future.

“With over a thousand businesses starting everyday in Britain, the British Business Bank has provided over £4bn to SMEs, and is unlocking a further over £20 billion of new investment for small businesses.”

Source: Hereford Times