The recent quarterly finance review has demonstrated a steady rise to normal lending levels for SMEs, according to figures released by UK Finance.
This increase in lending has come as a result of two factors: the end of Covid-19 restrictions and the large surge in cost pressures that have come about from the cost of living crisis. Both of these factors have crippled businesses and their financial reach. In many cases, it has left owners struggling to keep afloat. While the coronavirus pandemic was a killer of enterprise, the financial support schemes did help to combat those woes somewhat.
Cashflow finance has been supplied through overdrafts, invoice finance and asset-based lending primarily. All of these refinancing solutions are charged with the aim of supplementing businesses with the added finance that they will need to bat away financial uncertainty or grow with more conviction.
Gross Lending
Demand for finance has been relatively low over the past year, amalgamating to £5-billion per quarter from high-street banks. £4.9-billion was borrowed during the first quarter of 2022, compared to £5-billion during the same period in the previous year.
Overdrafts
Overdrafts did increase on the numbers from the same quarter of the year before. They were up 23% when compared with the numbers in the same period during 2021. At the same time, growth still remains lower than it did before the pandemic.
Deposits
There was a 1.4% drop in SME deposits during this year’s quarter, falling to £266-billion. This highlights that SMEs will continue to have access to large accumulated deposits with the overall value standing at £69-billion, 35% more than during the same period in 2020.
SMEs are continuing to meet government lending scheme repayment requirements. Current data suggests that many businesses are managing to make repayments as scheduled, however, we of course understand that many have not been able to keep up with their obligations.
The Managing Director of Commercial Finance, Stephen Pegge, said: “Activity across the economy continued to expand at the start of the year, but SMEs were beginning to face a pick-up in economic headwinds. While concerns about household finances have been making headlines, many businesses are also dealing with sharply rising input costs and more uncertainty about the demand outlook.
“Nevertheless, finance usage and demand by SMEs shifted little in the early months of 2022. Overall lending has been broadly stable, but there has been a modest pick-up in new overdraft approvals and utilisation in addition to continued growth in invoice finance and asset-based lending advances. This is likely a response to the now complete reopening of all parts of the economy as well as the increase in cost pressures.
“Our data continues to show that SMEs are meeting repayments of government-backed loans, accessed during the pandemic, but this has not significantly dented the financial headroom available through deposits and flex in other arrangements.”
Lending on the up
So, in conclusion, numbers from the first quarter of 2022 demonstrate that businesses are generally moving back towards normal borrowing levels pre-pandemic. At Business Helpline, we advocate borrowing money to generate extended levels of growth but we do understand that some people might see borrowing as a solution to pay off debts.
However, the problem with borrowing to cover existing financial troubles is that it simply puts a plaster over the crack. It is a temporary, short-term fix. You should always have a good, hard think before committing to this kind of borrowing – whereby the potential upfall is limited.
Please do talk to the good people at Business Helpline if you would like to create a refinancing plan before you commit. By doing this, you will be putting your trust into the hands of compassionate experts who want to create the best solution for you and your team. Call us at 0800 088 2142.
