Small business lending leaps to £1.25bn record

New lenders on the scene have boosted small business finance in the UK, figures show.

Access to finance for small businesses has been a key focus of economic policy in the UK. Since it’s clear that small firms are the engine of growth, comprising the vast majority of UK companies, moves such as the Funding for Lending Scheme have been targeted at putting finance at the fingertips of small and medium-sized enterprises (SME).

However, where the major banks are reluctant to lend, alternative finance has become increasingly popular.

That explains why new figures from the National Association of Commercial Finance Brokers (NACFB) show that SMEs are currently enjoying record levels of funding.

The trade body for finance brokers says that in September, as much as £1.25 billion was loaned to small businesses. By comparison, in May that figure stood at £1 billion, and in September 2013 it was just £800 million. Year-on-year, that equates to a 55 per cent leap.

Funding increased across all the lending platforms studied, from high street banks to challengers, crowdfunding platforms and peer-to-peer networks. Yet interestingly, it appears that much of the increase is related to an influx of new lenders to the small business market.

Shawbrook Bank, the challenger bank founded in 2011, and the peer-to-peer lender Wellesley & Co that was set up just last year, are among those who NACFB says have provided financing opportunities for companies that would otherwise have struggled to borrow what they needed to grow.

However, the trade organisation also pointed out that there is still work to do to improve the situation for SMEs. In spite of the opportunities open to them, many small companies are ultimately unaware of the options at their disposal and educating them is key to kickstarting both their futures and the economy as a whole.

“There are still too many business owners who are in the dark about their finance options. There are many lenders in the UK who are already lending to small businesses, and would love to lend more,” said Marcus Grimshaw, NACFB chair.

Government initiatives are playing into these attempts. Banks that turn businesses down for loans may soon have to ask small companies if they want their details to be passed onto an alternative lender, based on the outcome of a recent consultation. Whatever measures are introduced, it seems there is a world of finance out there if SMEs know where to look.