Small and medium-sized enterprises (SMEs) that are rejected for bank funding are to be offered access to an “SME dating agency” that will connect them with independent, non-bank lenders who are willing to back them, according to a Government report.
As the report points out, the largest four banks account for 80 per cent of UK SMEs’ main banking relationships, which is not good for competition or for large numbers of small firms, 50 per cent of whom are turned down for finance on their first attempt. This is why the Government is in talks with an organisation that will match small firms wanting loans with alternative lenders.
The alternative online business funding market has grown by 168 per cent in the past nine months. It is estimated that the amount provided to SMEs by alternative online funders rose from around £318m in September to £852.5m in June and it is probable that the total will soon surpass £1bn.
Meanwhile, Xavier Rolet, CEO of the London Stock Exchange, argues that the UK’s culture of debt is preventing SMEs from achieving their potential. Mr Rolet explains that being starved of credit means that entrepreneurs are paying a heavy price for having bank lenders as their only option.
The news of help for SMEs in the market for borrowing could not have come at a better time, as separate research has found that most small businesses only have cash savings to last two weeks if unforeseen circumstances were to force them to cease trading temporarily.
The survey revealed that although more than half of SMEs have a cash reserve of £10,000, three in 10 have £500 or less. The study’s organiser said that even after last year’s storms and flooding, which cost over £830m of damage to firms nationwide, small businesses are woefully under prepared for unforeseen circumstances, which will prevent trading.
