At Adcroft Hilton, we\’ve been closely monitoring the financial landscape for SMEs. Recent findings reveal some concerning patterns, but also highlight areas of opportunity and hope. Let’s dive in.
A significant 67% of UK SMEs feel that banks today are less eager to lend to them. This sentiment rises to 71% among SMEs boasting a turnover of £1million to £5million. Bibby Financial Services, a noted independent SME funder, further underscores this sentiment. Their research shows that 43% of UK SMEs see their demand for external finance growing compared to half a year ago. Worryingly, while nearly half of these SMEs need more support, 54% find accessing finance tougher than before.
Delving deeper, 42% of SMEs leveraging external finance sources shared that traditional lenders have shrunk their funding availability from March to September, as reported in the latest SME Confidence Tracker by BFS.
Theo Chatha, the chief financial officer at Bibby Financial Services, weighs in on this, saying, \”This emerging trend is of significant concern, especially as it could hinder the UK\’s economic rebound and exert more strain on our SME community. The data hints at a shift in the UK credit cycle amidst business challenges we haven\’t seen in many years.\” He added that while banks might be in a better financial position than during the Financial Crisis, the current economic atmosphere and several initiatives could be ushering in stricter lending norms. Chatha warns, \”This could escalate, possibly leading to an upsurge in insolvencies—a concern already flagged by the Bank of England.\”
Given the rise in inflation and the persistent high costs of interest rates and energy, SMEs are naturally seeking out solutions. To alleviate their struggles, 65% of UK SMEs hope for enhanced tax incentives, while 57% wish for the next Government to ease access to loans and grants.
Supporting these insights, the BDRC’s SME Finance Monitor disclosed a drop in credit application success rates among SMEs: down to 46% in the second quarter, a stark contrast to the 74% pre-Covid.
However, it\’s not all gloomy. A heartening 63% of SME decision-makers are hopeful about sales growth in the coming months. When considering external finance, 38% cite managing daily operations as their reason. Additionally, a significant 49% of SMEs seek funding to propel their growth and expansion.
Concluding on an optimistic note, Chatha reminds us, \”While traditional lending avenues might be narrowing, there\’s an abundance of independent options for SMEs now. The banking sector isn’t the sole lifeline for businesses in search of funds. Today, there are numerous avenues SMEs can explore to not only sustain but also flourish.\”
We remain committed to assisting SMEs navigate these financial waters. If you are concerned about your business finances, please do get in touch.
