Brexit fog sees SMEs flock to non-bank lending
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One eye-catching detail of the Bank of England’s latest Inflation Report, published last week, is the worrying collapse of business investment.
Introducing the report, the Bank’s Governor, Mark Carney, said that while the economy was ticking along nicely and consumer spending had picked up, business investment had fallen by 2% over the past quarter, a trend which looks set to continue.
“The latest business investment intentions surveys point to further declines over the next few quarters, which would mark the longest run of falling investment in the post-war era,” Carney said.
Much of this decline can, of course, be put down to what the Governor called “Brexit Fog”, whereby firms are putting investment plans on ice until the Brexit outcome becomes clearer. But there are also signs that the fall may be driven in part by banks becoming less willing to lend.
The Bank employs dozens of ‘agents’ up and down the country (not as sinister as they sound, by the way) who have one-to-one confidential conversations with businesses in their area; they are the Bank’s eyes and ears on the ground.
And what these agents are hearing is that the availability of bank credit has tightened for sectors that may be more exposed to Brexit, such as export-focused firms.
It’s a finding that is backed up by recent data from UK Finance, the industry’s trade body. And the data shows that SMEs are bearing the brunt of this tougher lending criteria from traditional providers, with the value of loans and credit outstanding to small businesses falling by nearly £6bn in the past five years.
Given that a large proportion of SMEs require funding simply to stay afloat, it’s no surprise that they are turning to alternative sources when the traditional lenders are putting more and more obstacles in their way.
And that’s precisely where CODE Investing comes in. As a leading marketplace for debt finance, we are committed to helping SMEs reach their full potential by helping them secure the funding they need, when they need it. We do this by matching businesses with lenders based on an alignment of lending criteria.
Business owners want fast, flexible access to finance, not endless form filling and unrealistic demands. From identifying potential lenders and providing due diligence guidance to document preparation, CODE Investing makes the process of getting the loan you need much quicker and pain-free.
And proprietary technology performs the preliminary checks so that we can focus on finding the best financial match for your business.
SMEs, responsible for 60% of all jobs, are a crucial part of our economy and yet small business lending accounts for only 2% of banks’ balance sheets, according to a recent report by Oxford Economics.
The Bank’s Inflation Report highlights that it is now more important than ever that alternative providers such as CODE Investing can plug this gaping funding gap.
The unsecured loans we have access to through an institutional lender, ranging from £500k to £5m and which require no warranties and personal guarantees, are already helping achieve that.
CODE launches the UKs first portal providing intermediaries with instant indicative decisions on loans up to £5M.
We’ve helped a global construction contractor source an MBO funding package from a range of lenders alongside our corporate finance partners.
CODE Investing attended this year’s NACFB Commercial Finance Expo in Birmingham and showcased their latest key product offerings.