The outstanding value of non-emergency lending by banks to SMEs has dropped by 10% from £168bn in December 2019 to £152bn in December 2020, shows new research from ACP Altenburg Advisory, the debt advisory specialist.
ACP Altenburg Advisory says the research shows that once CBILS and BBLS loan schemes come to an end, SME businesses are likely to struggle to obtain finance from banks which is not partly or fully underwritten by the Government.
Total CBILS and BBLS lending to SMEs has ballooned from £4bn in April 2020, to a total of nearly £61bn that has been lent by December 2020*.
Once the CBILS and BBLS schemes come to an end, ACP Altenburg Advisory says banks may have limited appetite to lend and increase their exposure to the SME sector any further, given the significant increase in overall SME lending over the past 12 months when including the emergency lending.
Many banks are already reducing non-emergency lending to new to bank business customers. As CBILS and BBLS loans are underwritten by the Government, banks have been able to offer better terms for those loans than for ‘business as usual’ lends, which do not provide lenders with the same safety net.
ACP Altenburg Advisory says, therefore, alternative lenders are likely to be sought after in the coming months as SMEs find it more difficult to obtain finance from traditional lenders.
Will Senbanjo, Partner at ACP Altenburg Advisory said, “CBILS and BBLS loans have dominated banks’ lending activities to such an extent that they have limited capacity to write normal loans to SMEs. This means that businesses looking to grow may struggle to obtain the funds they need.”
“SMEs looking to raise additional funds for growth in the months ahead may need to look at the alternative options, such as asset-based lending or alternative lender funding. Alternative lenders are open for business and are keen to deploy capital to well-managed businesses that have strong growth potential.”
Debt advisers can be crucial in helping a business to obtain the right funding package to fit their business needs. Advisers can help a business understand and explore the various funding options open to them, and then help them present their business to the most appropriate lenders in the right way.
*Based on data from the Bank of England and the British Business Bank. SMEs are defined as businesses with less than £25m turnover.
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