The value of SME asset finance deals (up 12%) and peer-to-peer business lending (up 51%) in 2017 both showed strong growth. Although net bank lending volumes remained positive (£0.7bn) in 2017, they were weaker than in both 2016 (£3bn) and 2015 (£2bn). Significant increases were seen in 2017 in both the value and number of SME equity deals (up 79% and 12% respectively).
Though the report finds that some progress has been made in developing high-growth businesses in the UK, and in the provision of equity finance to support that growth, British Business Bank analysis suggests more UK start-ups could become fast-growth businesses with greater availability of long-term patient capital. Such finance is a key ingredient in enabling firms to scale up and a significant economic impact could be made if availability was raised to the same level as the US.
The report finds a decline in smaller business confidence and low demand for external finance is becoming entrenched as their cash balances rise. Bank analysis finds that, over the last ten quarters, only 1.7% of smaller businesses sought new loans, a record low since the SME Finance Monitor began in 2011. Less than half (43%) were confident they would get a loan if they applied, even though most new loan applications (72%) are approved. Moreover, 70% of SMEs are willing to forgo growth rather than borrow, continuing a trend identified in last year’s Small Business Finance Markets report.
Keith Morgan, British Business Bank CEO, said:
“A core objective of the British Business Bank is to encourage greater diversity of finance, so we welcome the growth in the uptake of equity finance and other alternatives to traditional lending.
“It can’t be overstated how important it is to build a more complete funding ladder for economically important high-growth businesses no matter where they are located. Scale-ups need more long-term patient capital throughout all stages of their development to be world-beating companies, and we look forward to using our new resources allocated at Autumn Budget to unlock more of this type of capital.”
