SME business finance – where is it?

bank of englandWhilst the UK economy continues on its growth path, and is at least firing on some cylinders (if not all), business finance for the SME sector remains patchy.

The Stats

Bank of England figures – released on 29 November – showed that net lending to the SME sector had fallen by some £206m in October.

It’s worth looking at the underlying picture here; in that month, gross lending was actually at the highest it had been for over two years, but this had been exceeded by repayments from SMEs to the banks.

Funding for Lending Scheme

In a further news release from the Bank of England on 2 December on the Funding for Lending scheme (see this previous blog for comment), the picture was mixed for the SME sector.

Whilst net lending to all businesses from the participating banks was £3.6bn for the quarter ended 30 September, in the Bank of England’s own words “… the growth rate of lending to private non-financial corporations remains muted.”

The report also suggests that whilst credit conditions for business overall have eased, this is not as clear for the SME sector.  The report goes on to say that indicative interest rates have fallen modestly since the middle of 2012, when the scheme was introduced, but that this does not show the full picture as these fees do not includes the impact of associated fees.

Strangely, the report also says – in a positive vein – that gross lending in the three months to October was £1.5bn higher than a year ago, but then goes on to say that repayments had risen by more, meaning that net lending had fallen!

Paul Fisher, Executive Director for Markets at the Bank of England, commented that: ‘…credit supply to businesses remains relatively subdued, especially to SMEs’.

SME research into availability of funding

There is also some interesting data from Everline, the online short-term lender to small businesses.  The research is compiled from a poll of 500 small business owners:

  • Almost half admitted having cash flow problems
  • 70% said regular access to cash flow was crucial
  • 29% said that lack of availability of cash flow was restricting their growth
  • 23% had put all marketing activity on hold
  • 28% paid suppliers late as a result of poor cash flow
  • 18% said that they had a cash flow problem at least once a month
  • 43% said that availability of business funding was worse now than before the financial crisis

Anecdotal evidence

The feeling I get from both clients and colleagues in the market place, is that business finance is still hard to come by for the SME; unless of course that funding is for those with assets coming out of their ears, and very strong balance sheets.

The evidence before us is that these businesses are choosing not to borrow and invest, even with the business growth we have seen in 2013.  Maybe this is how it should always have been, the weaker businesses find it incredibly difficult to borrow money, and the strong businesses can borrow what they like, within reason.

The reality of business finance availability

There is funding available for virtually all businesses, but as the data above shows this is not necessarily from the Banks.

I continue to be surprised that invoice finance has not been used by more SME businesses during these difficult times.  If you chose the right product and negotiate the right deal at the outset this form of business funding can prove to be both flexible and cost effective.

There are also an increasing number of alternative funders out there only too happy to step in where the banks are falling short.

As with many things in business – you just need to know where to look…


If you have any comments on this article or would like to discuss any aspect of it please contact me at or on 0845 689 8750.


Image by: James Stringer