High Street Banks slash Funding for SMEs
Small and medium-sized enterprises (SMEs) are finding it increasingly hard to access funding from high street banks, new data from fintech firm iwoca reveals.
According to data from iwoca, 84% of finance brokers said high street banks were increasingly reluctant to lend to SMEs. This was seven percentage points more than the quarter before.
The data was collated from more than 100 SME finance brokers who submitted over 950 finance applications for SMEs in June.
While high street banks are less eager to lend to SMEs, demand for financing is set to increase with 81% of brokers predicting it will rise over the next six months leaving a substantial shortfall for small businesses.
Steven Mooney, CEO of FundMyPitch, said: “Once again, the big banks are failing in their duty of care to British businesses. After receiving taxpayer funded bail outs, it’s truly astounding that these organisations aren’t doing more to support hard-pressed entrepreneurs during their hour of need.
“The government cannot continue to sit on its hands around this issue and should order banks to provide lifelines to companies that need it to get the economy moving again.”
Colin Goldstein, commercial growth director of iwoca, warned that the economy would suffer if SMEs were unable to access the financing they need.
“With high street banks continuing to pull back from SME lending, small businesses need attractive options for financing, or the significant growth potential that they offer the economy will be lost,” he said.
The figures reinforce a bleak outlook for SME’s access to finance. Data from the Federation of Small Businesses (FSB) showed that one in three small businesses applying for financing were offered a rate of over 11%, up from just 12.2% in the same period last year.
Martin McTague, National Chair of the FSB, said higher interest rates are posing an “existential threat” to some small businesses.
“A wide product range beyond traditional loans and overdrafts could help small firms access some of the funding they need, while helping banks grow their new business levels in a sustainable way,” McTague said.
Rising borrowing costs have contributed to the recent surge in insolvencies, which hit their highest level since 2008 in the second quarter of this year.
The Bank of England estimated that the proportion of medium-sized firms who will see debt-servicing distress is likely to increase to 70% as a result of rising rates.