British Business Bank’s SME General Analysis
On 20th February, the British Business Bank (BBB) published its fourth report on the Small Business Finance Markets. The report is an SME general analysis and looks at their growth, productivity, and how they access finance. This year’s report also looks in depth at the regional disparities on how SMEs access finance.
The report highlights the diversification of SMEs’ finance choices. A record number of start-ups have been set up over the last year, and there are more SMEs than ever in the UK.
The report also holds some good news for SME asset finance deals. However, with various macroeconomic factors taking their toll on business, such as Brexit and political instability across both the Channel and the Atlantic, it isn’t all good news for the UK’s business outlook.
We’ve put together a summary of the report’s highlights and low-lights for SMEs
The major positive to take from the report is that new asset finance volumes with smaller businesses was over £18.6bn by the end of 2017. This shows an increase of 12% on 2016. Peer-to-peer business lending also jumped up by 51% in 2017.
Significant increases were seen in 2017 in both the value and number of SME equity deals, up 79% and 12% respectively.
These figures are warmly welcomed by the SME community. It shows that SMEs are thinking more about their finance choices. Small businesses are not just relying on large banks for finance, and are looking for alternative sources of funds.
Whilst we have lots of positives to take from the report, it also notes that SMEs are still finding it hard to raise capital, particularly when starting out.
Almost half of first time applications for business bank loans and overdrafts are still rejected. Analysis has found that over the last two and a half years, only 1.7% of SMEs applied for new loans. This is the lowest figure since the SME Finance Monitor began, back in 2011. Net bank lending volumes are still just about positive at £.7bn, but this is substantially weaker than in the past two years.
As a result, business confidence is low. This highlights the need to raise more awareness with SMEs that there are alternative sources of finance out there.
What this means for SMEs
There has been financial growth for SMEs, this much is clear. Both through traditional methods such as bank lending, as well as through non-traditional ones such as asset finance and peer-to-peer lending. The growth potential for SMEs is huge. It’s encouraging to see more and more small businesses exploring these alternative methods of finance.
This is a trend the British Business Bank has said it wants to see continue. As such, they will be introducing a new “digital information hub” this year for SMEs. This will help them find the finance options which will work best for them. The regional disparities in availability of finance are also highlighted by the report and it is hoped that, through the government’s industrial strategy sector deals, there will be focus on helping SMEs in the regions flourish.
To discuss your small business finance needs, please don’t hesitate to contact us.