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Finance brokers see lending to SMEs rise substantially

Borrowing by small and medium-sized businesses (SMEs) has jumped substantially in a year, according to a new survey.

The National Association of Commercial Finance Brokers (NACFB) is the UK’s largest independent trade body for commercial finance brokers. Its members facilitated £40.9bn of funding in 2021.

Its annual survey points to a return to 2019 funding levels, with the average size loan facilitated by members in 2021 standing at £458,582, up 17 per cent on the year before, and surpassing 2019’s average loan size of £450,145.

For those unable to get finance, the results showed that the most common reason a client’s loan application had been declined was that the sector had been ‘deemed too risky’ by the lender.

Funding growth enterprises

Survey respondents ranked UK regions in order of where their clients’ funds had been utilised. The East Midlands came out on top followed by Greater London.

According to the survey, the East Midlands remains the heart of UK manufacturing and advanced engineering, accounting for 20 per cent of UK manufacturing output. The South and East of England came in third and fourth place respectively.

However, members reported a decline in enquiries from SMEs in both the retail and hospitality sectors, but also predicted a return for hospitality loan enquiries in 2022.

Members also anticipate an increase in requests for finance in the construction sector. In total, the association’s members welcomed 146,885 new SME clients last year, an average of 146 per brokerage.

The Recovery Loan Scheme (RLS), the state-backed loan scheme facilitated by the British Business Bank, replaced COVID-19 support schemes in 2021.

The average size RLS facility via an NACFB member stood at £539,281 – over twice the size of the average sized Government loan in 2020 suggesting that when businesses needed state-backed funding in 2021, their need was comparatively greater than in the year before.

However, engagement with the RLS was lower than many expected. Of the NACFB members that engaged with the scheme, on average only 11 deals per brokerage were placed through it.

Half (49 per cent) of members said the main reason for reduced scheme activity was a lack of direct RLS enquiries, whilst 16 per cent said their clients simply did not meet the scheme’s criteria.

Forging stronger relationships

NACFB Chair, Paul Goodman, responded to the survey results: “The data proves what we in the industry have long known, which is just how vital the intermediary-led route to market is for the UK’s 5.6 million SMEs.

“The trade body continues to forge stronger and deeper cross-party relationships within Government, as well as the British Business Bank and the Bank of England. We will engage with any stakeholder that needs to know more about the essential work NACFB Members undertake,” he added.”

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