Lending to SMEs falls

Bank Lending to SMEs Dropped over Past Year

The access to business finance can make or break business ideas. Many businesses struggle to gain finance or are put off by the prospect of fighting for it. The availability of finance for SMEs can have a lasting effect on the UK economy as it can stint growth and start up rates.

New research has highlighted that access to finance is a growing concern. Over the past year, bank lending to SMEs has fallen sharply.

Hadrian’s Wall Capital (HWC), a London-based debt adviser, found that 84% of the country saw lending to SMEs fall. This means that many new small businesses are struggling to get financing they need either to start up or expand.

HWC said that 101 of 120 areas in the Britain saw falls in the value of outstanding bank loans to SMEs last year. They say that overall lending has fallen by 5.2% or £9.7 billion in a year.

Best performing areas hit too

Even the best performing parts of the UK in terms of economy, have seen falls of 23% in London EC postcodes. Those in WC postcodes have seen falls of 21% too in the last 12 months.

There were only four areas in Britain that saw increases of more than 3% in bank lending – Crewe, Llandrindod, Norwich and Inverness.

Fixed rate finance

HWC’s research found that just a 0.25% rise in interest rates would cost SMEs £355 million more in extra interest payments for bank loans.

As a result of this, HWC said that it saw an increase in enquiries about the fixed rate finance they offer businesses. They say that while demand for fixed rate loans has risen, the access to this has fallen sharply.

Only 11% of bank loans are now on a fixed rate which is down from 49% back in 2012. This means SMEs could face a lot of uncertainty and risk if interest rates should change.

Marc Bajer, CEO of HWC said: “With the period of very low interest rates ending and banks reducing SMEs fixed-rate lending, we don’t expect securing finance to get any easier for small businesses in the foreseeable future. Small businesses really need finance which they can rely on in the long term, and which is now in increasingly short supply.

“Advisers to small businesses need to be aware that while banks are no longer able to provide long term, fixed-rate lending, it is available from alternate providers,” he added.


Have you found it more difficult to find finance? Why do you think that is? Please share your thoughts below.

Stephanie Whalley
Serial snacker, compulsive cocktail sipper and full time wordsmith with a penchant for alliteration, all things marketing and pineapple on pizza.