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SME business lending October 22

ended 29. November 2022

Tomorrow morning, the Bank of England is publishing data on lending to SMEs. Few Qs for you:

  • Is it proving harder for SMEs to get finance in the current climate?
  • Are you expecting it to get harder still as the economy enters recession?
  • In its last report, the BoE said interest rates on new loans to SMEs increased by 13 basis points to 4.28% in September. Do you expect it to be higher in October?
  • Are you seeing more SMEs switch to alternative lenders as high street lenders start tightening their criteria (or perhaps they're not)?
  • What will be the main business finance challenges facing SMEs in the next 12-18 months?

Any other thoughts, jot them down. Do NOT write War and Peace.

3 responses from the Newspage community

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Ian Hepworth
Director at Funding Solutions UK Limited
The sharp rise in net repayments by SMEs in October suggests businesses are looking to get themselves shipshape ahead of a turbulent 12-18 months. It is considerably more challenging for businesses looking for funding right now. Lenders, understandably, are being more cautious. They have increased rates, valuations on assets are reducing, the 'loan to value' offered is lower and they are more likely to ask for personal guarantees. The unsecured loan market is far less active than it was and rates are often in excess of 15%. The Government-backed Recovery Loan Scheme 3.0 seems to be a damp squib. Business owners are facing the perfect storm in terms of cash flow. Customers are slower to pay, suppliers are restricting credit and disruption in supply chains is forcing businesses to carry more stock. All this eats away at working capital. The good news is that funding is still available. However, businesses may well need to look beyond their bank. They may also have to use specialist products such as invoice finance, trade finance and asset finance rather than traditional loans and overdrafts. As bleak as it all seems, there is still a lot of good news out there. Businesses are winning large new contracts and acquisitions still seem active. Funding is still available to those businesses that are looking to borrow for the right reasons.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
It's good to see many SMEs are starting to pay down their debt in earnest to get ahead of the curve. Banks are expecting SMEs to fail in this economy so are restricting lending and increasing rates when they do lend. This will get worse over the winter and into Spring. Only when inflation comes back down to normal levels and the central bank starts cutting rates will confidence in the economy return and banks start to lend to the surviving businesses on more attractive terms. When banks tighten up, alternative lenders come into play. The largest peer to peer lender is Funding Circle, but the market is massive and will only increase over the next 12 months as businesses (and consumers) look for lenders who will offer finance when traditional routes don't come good.
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Marcus Wright
Managing Director at Bolton Business Finance
We are still seeing fairly strong appetite for lending to SMEs at present, despite the various economic pressures. Most of our lending panel are still very much open for business including high street banks and more specialist/alternative lenders. Rates on unsecured business lending have crept up slightly but not significantly. It's possible that lenders may reduce their appetite if the economic data gets worse going into 2023. With that in mind, it's crucial that SMEs plan ahead and identify any funding requirements they might have, possibly securing funding now while appetite is still strong.