Access to Finance for SME

sme business lending UK

POSTED ON: Friday, February 20th, 2015


Now we are well into the new year, the question on everyone’ lips is …

“Are Banks lending to SME Businesses?” … “Oh no they’re not!”

Well you’d be wrong … “Oh yes they are!”

If you look at the major Banks across the UK, their desire and ability to lend to the SME Business Sector is as strong as ever:


… committed to lending to businesses and supporting economic growth.

RBS / NatWest

… with £10bn of new lending – proactively contacting business customers outlining how much additional borrowing the bank is willing to lend their business


… growth charter to help SME businesses achieve growth ambitions … growing lending by at least £1bn net


… 52 local SME funds , allocating almost £6bn in new lending to help businesses achieve their growth plans


… initiative to become SMEs’ partner for growth, with expectation to expand SME lending by more than 10%

and some of the Challenger Banks too …

Metro Bank and Handelsbanken – whilst understandably are not looking at ‘cut price’ strategies to win business ‘switchers’ from the main players, are providing more than just physical competition, with alternate customer experiences, lending strategies and extended opening hours.

Mixed Messages:


So, collectively there is a huge desire and ability to lend to the SME Business Sector from right across the Banking sector, but there are mixed messages in evidence …

A number of Banks will acknowledge that whilst there is a desire to lend, a significant proportion of the existing SME Business lending book is being repaid, and not necessarily renewed  >>> creating a strong need for New lending propositions. Never as easy a task as continuation or renewal …

Conversely, certain Banks reveal in open forum that … despite a net lending decline across the banking industry as a whole, they  will commit to growing SME Business lending year on year.

The Government, understanding that the Banks have the dilemma of balancing the scales of  ‘Risk and Reward’, have introduced various schemes, including The Enterprise Finance Guarantee – aimed at improving the availability of working capital and investment funding to viable smaller businesses that would otherwise be declined for lacking adequate security.

Whilst there  are many more Funds, Incentives and of course, New Players in the market … Business Angels; Peer to Peer Finance;  Crowd Funding … … …

… What of the SME Business Sector itself?

Supply is one thing, but what of Demand?

Mixed Messages:


Data produced by BDRC Continental from their Q2 2014 SME Finance Monitor reveals a very interesting picture of ‘how SME Businesses feel about accessing external finance’

Use of External Finance

  • Use of external finance remains steady at around 4 in 10 overall – increasing by size of SME


0              = 35%

1-9          = 50%     Overall

10-49     = 59%     = 39%

50-249  = 64%

  • NB  there are as many Permanent non-borrowers as there are SMEs using external finance

39% Permanent non-borrowers                … vs … 39% use external finance now

Appetite for Finance

  • Nearly 8 out of 10 SMEs did not seek finance over  last 12 months

78% – non seekers;          5% – would be seekers;                 17% – ‘users’

  • Future Appetite for Finance is pretty stable over time – anticipated over next 3 months

68% – non seekers;          18% – would be seekers;               14% – plans to apply/renew

Economic Climate vs Access to Finance as a major obstacle

  • All SMEs  views on economic climate vs those SMEs with any future appetite for finance

17% saw economic climate as a barrier … vs … 17% saw access to finance as a barrier

NB Q1 2013 – economic climate = 32%; access to finance = 27%


SME confidence that their Bank will agree to future lending requests – remains below success rate

  • Measuring SME confidence of future lending success vs actual success rates

All applications – 40% Confidence of success … vs … 66% Current success rate

Renewals              – 51% Confidence of success … vs … 96% Current success rate

New money         – 29% Confidence of success … vs … 46% Current success rate

So, to the burning question …

How can SME Business Finance for Growth Demand be stimulated?

  • Only half of SMEs aware of any of the support initiatives tested – varying little over 3 years

Funding for Lending        – 29%

Business Mentors              – 23%     only 54% of SMEs aware of any of the initiatives

Business Growth Fund    – 16%     ‘range’ from employees: 0 = 53% to 50-249 = 63%

Appeals                               – 13%

A topic for next Newsletter me thinks ?… …

How SME Businesses can benefit from External Support to fuel their 2015 Growth ambitions …

… Finance for Growth …

… Government Grant Funding for Growth …

… Business Coaching for Growth …

Written by Simon Lewis, 

Director | Pro-actions  

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