Business lending stabilises

UK Finance’s Business Finance Review for Quarter 3 2021 has shown that gross lending to SMEs was around £5.2 billion in Q3 2021, indicating that business lending figures broadly unchanged from the previous quarter.

The report Applications for new loans and overdrafts continued to trend down over the quarter – consistent across sectors and regions.

Whilst the value of repayments rose again in the three months to September, with a varied sector picture on the quarterly profile of repayments. Government-backed loans have shifted the balance between finance on fixed and variable interest rates.

Overdraft utilisation remains below pre-pandemic levels, providing ongoing financial headroom.

Stephen Pegge, Managing Director of Commercial Finance, said “As the economic recovery continued in the third quarter, our finance indicators for SMEs have stabilised in recent quarters. Demand for new finance has been relatively subdued compared with that seen last year, as remaining restrictions have been lifted and businesses return to trading more normally.”

“The focus for many businesses had now turned to meeting repayment obligations of government-backed loans accessed through the pandemic. Our data points to steady increases in repayments as they fall due, with growth in repayments evident across all sectors.”

“However, many businesses will face some headwinds from supply chain bottlenecks and rising input costs. SMEs continue to have headroom within existing facilities, such as overdrafts and invoice finance lines, and high levels of cash deposits which should help meet these challenges. There is also flexibility in repayments through the Bounce Back Loan Scheme ‘Pay as you grow’ options.”

“For businesses planning future investments the finance sector is ready to support these with commercial lending and the extended Recovery Loan Scheme, which will be available to SMEs into 2022. While the recovery will not be without growing pains, financial availability and support from the sector should help SMEs navigate these in the coming quarters.”