SME lending: comparing the market
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Comparing high street business lending to the SME lending market as a whole — adding alt-fi providers, challenger banks and the emerging ranks of institutional lenders to the mix — is like comparing apples with oranges.
This fact was driven home once again in October with the publication of the Bank of England’s Q3 Credit Conditions survey of high street banks and building societies. The survey was out of sync with what we’re seeing on the ground.
Based on feedback from survey respondents, the two main conclusions of the report were that the overall availability of credit to the corporate sector was unchanged in Q3 and was expected to decrease slightly in Q4; and that demand for loans from SMEs dropped off in Q3.
Demand shifts direction
In our experience, the availability of credit to UK businesses as a whole has never been more abundant, largely because the alternative lending landscape has grown so substantially in recent years. Neither is it likely to drop off during the fourth quarter, despite Brexit.
The reason for this is that, while Brexit-related nerves are in many cases causing the high street banks to sit on their hands, many financially strong alternative finance providers see the current macro-economic uncertainty as an opportunity to increase their market share.
Equally, we’re not seeing a drop-off in demand from smaller businesses and SMEs at all. What we’re seeing, very clearly, is demand shift direction towards the growing number of alternative finance providers whose appetite to lend remains strong.
Of course, Brexit-related uncertainty will have caused many firms to err on the side of caution, but in our experience the number of smaller businesses and SMEs seeking finance from the market as a whole (not just the banks and building societies) edged up in the third quarter.
Aware of their options
These days, a growing number of SMEs do not simply default to the high street when looking for finance. That modus operandi is no more. They are increasingly aware that there are far more options, many of which will be not just more competitive but also more flexible.
After the Global Financial Crisis, they’re also aware that in the current climate many banks are tightening their lending criteria. This is especially the case for SMEs looking to arrange unsecured loan finance: on the high street it’s already a mission impossible. Elsewhere? Far from it.
Few can deny that, in Brexit, we are approaching one of the most significant politico-economic events for decades. But at the same time, there are lenders out there that remain hungry to lend. What’s key is that firms seeking finance get it from the right sources and at the right price.
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Press Release: Borro Chairman John Allbrook appointed to CODE Investing board, as Mark Collings joins as Chief Commercial Officer
Boosted by new strategic partnerships with BNP Paribas Asset Management and PCF Bank, CODE Investing hires CCO and new board member for future growth.
CODE Investing & BNP Paribas Asset Management have completed an unsecured loan to Hampshire-based domiciliary care provider, Apex Prime Care.
We’ve helped our client ‘Apex Prime Care’ arrange a six-figure, eight-year loan facility through one of our major institutional partnerships.