Wednesday 10 February 2021 9:59 am

Exclusive: ‘Normal’ bank lending to SMEs down 10 per cent in 2020 as emergency loan use explodes

Non-emergency lending by banks to SMEs dropped 10 per cent in 2020, while emergency coronavirus funding ballooned.

‘Normal’ lending to SMEs fell from £168bn in December 2019 to £152bn a year later, research by debt specialist ACP Altenburg Advisory found.

At the same time, emergency coronavirus funding via the Coronavirus Business Interruption Loan Scheme (CBLIS) and the Bounce Back Loan Scheme (BBLS) exploded, with nearly £61bn lent to SMEs by December 2020.

ACP Altenburg Advisory said when the emergency loan schemes come to an end, SME businesses are likely to struggle to obtain finance from banks that is not partly or fully underwritten by the government, as banks may have limited appetite to lend and increase their exposure to the SME sector any further.

Many banks are already reducing non-emergency lending to new to bank business customers.

 Will Senbanjo, partner at ACP Altenburg Advisory, said: “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.”