Supply and demand

7th October 2016

The NACFB’s lead generation site findSMEfinance suggests that there has been no decline in SMEs’ appetite for further investment. They are making long term plans that are unaffected by uncertainty.

In fact, the first half of August saw a massive surge in funding enquiries, often exceeding £2 million per day, twice the value of funding requested during the whole of July, and twice the level over the same time period in August 2015; with the number of enquiries also up by two-thirds. Although things then settled down, the total number of leads in August made it the busiest month of the year, while you’d normally expect it to be one of the quietest.

Since that three-week surge, interest has remained at the level of the start of the year throughout September.

The average size of loans being requested in August has also been usefully higher than during any month last year, as businesses are showing a healthy appetite to borrow. For Quarter 3 the average loan size was £133,000; that’s compared to £94,000 in June, pre-Referendum.

This has happened despite August typically being a quieter month for funding applications, and shows that businesses certainly aren’t procrastinating; if anything, they’re stealing a march on the opposition. The Association views UK SMEs as the lifeblood of this country and although without their demand for finance, there’d be little point in boasting about how well we are doing with the supply side.

Certainty will always win out against uncertainty; we know that interest rates are very low, whereas we don’t know who our trading partners will be, and on what terms, in mid-2019, for example. So borrowing now for future growth is not a high-risk strategy.

We are also looking for the Government to drum home the message that there are many routes that SMEs can take to find funding. It’s true that there is some caution out there about who is lent to, but there are more lenders than there have ever been in the commercial finance sector. From our point of view, seeing both figures grow – supply figures from one side, demand figures from the other – is quite simply the best possible news right now.

To bring this article up to date, at the time of writing this after the first week of October, we’re also seeing double the volumes of interest received in March, May or July. While it is too early to extrapolate much from that promising first sign, we will be keeping a close eye on the figures.

Part of the reason small businesses are engaged in medium to long term plans is that Brexit is far from being just around the corner. The triggering of Article 50 sets in motion a chain of discussions that will last two years, or possibly more. So when people use terms like “since Brexit”, the language gives the wrong impression. Not only has Brexit not happened, but also there is enough time left to make big investments and major expansion, before we’re forced to consider new trading realities.

Adam Tyler, Chief Executive Officer, NACFB