SMEs outside of London and South East receive two thirds of loans

Small and medium-sized enterprises (SMEs) outside of London and the South East received two thirds of loans in the first three quarters of 2019, according to the UK Finance’s latest Business Finance Review. While eight out of ten loan applications by SMEs were approved, there were four per cent fewer loan applications in Q3 2019 than in the same quarter of last year.

Some 40,000 businesses have been using invoice finance products over the past three years, during which time advances have grown by some ten per cent, while SME deposits are growing by five per cent per annum. Overdraft utilisation remains around 60 per cent, leaving SMEs with borrowing headroom.

The figures also show that small business loans and overdraft balances from big banks fell by almost 16% in the North West between the end of 2014 and September last year, from £9.8bn to £8.2bn, while loans and overdraft balances in London fell by only 2.3%. Wales saw a 14.2% drop, while Yorkshire and the Humber posted a 10.9% decline.

Stephen Pegge, Managing Director of Commercial Finance at UK Finance, said “In Q3 2019, SME lending saw modest growth led by the transport and communications sector with the proportion of firms reporting that their use of finance has increased.”
“Deposit balances continue to grow and are in aggregate twice the level of borrowing balances. This reflects subdued investment activity and the retention of reserves by businesses in the face of continued uncertainty. However, credit availability is strong with eight out of ten loans being approved and 50 per cent of term lending being committed for a term of ten years or more. Invoice finance and asset based lending has increased by ten per cent over three years as businesses seek a more diverse range of finance to support their cashflow needs.”