Specialist brokers say high street banks are restricting cash for SMEs

Nearly eight in ten brokers (77%) believe that high street banks are scaling back their willingness to fund small and medium-sized businesses, according to iwoca’s latest Q1 2024 SME Expert Index.

The figure remains unchanged from the previous quarter, reflecting the continued challenges SMEs face when accessing finance from traditional lenders.

Big businesses increasingly dominate the lending market

This comes as new analysis of Bank of England lending data over the past decade finds that big companies are occupying an increasingly large share of the lending market. Nearly four-fifths (77%) of bank lending by value went to larger businesses in 2023, up from 72% in 2014 and 2015.

iwoca’s analysis of the Bank of England’s data also shows that the total value of lending to SMEs from high street banks fell by over a billion pounds over the last year. Overall, gross bank lending to SMEs declined sharply from £15.5 billion in Q1 2023 to £14.2bn in Q1 2024.

Banks not meeting demand for SME finance

iwoca’s SME Expert Index finds that almost nine in ten brokers (86%) predict that demand for SME finance will rise over the next six months.

However, brokers say that they do not expect high street banks to meet this demand, with over two-thirds (68%) predicting that banks’ appetites for lending to SMEs will continue to decline, up from 65% in Q4 2023.

With traditional banking routes for SME finance continuing to shrink, just 25% of brokers say that they have a positive view of high street banks, while nearly half (49%) hold a negative view.

Colin Goldstein, Commercial Growth Director of iwoca, added: “Although optimism is quite high, the UK’s 5.5m SMEs are operating in an incredibly challenging lending market. From SME brokers across the country to official Bank of England data, the evidence is clear that the majority of high street banks are reducing their lending to small and medium-sized companies. This means that the importance of alternative lenders is more apparent now than ever. The good news is we are stepping up and in a great position to provide SMEs with access to the working capital they need.”