Business loans and overdraft approvals rise by 41.9%

The number of loans and overdrafts approved to SMEs rose by 41.9 per cent in Q1 2020 compared with the previous quarter, according to UK Finance’s latest Business Finance Review figures.

While there was growth across all sectors, the increase was especially marked in accommodation & food service (up 74 per cent) and recreation and personal services (up 69 per cent).

Gross lending totalled £5.6 billion in Q1 2020, marking the second consecutive quarter of decline.

The review says that businesses had a degree of financial flexibility ahead of the Covid-19 lockdown with access to unutilised overdrafts.

Lending approvals were concentrated in new overdrafts, which picked up in February and accelerated in March. Growth in approved overdrafts was widespread across sectors and regions, but particularly marked in hard-hit service industries.

Stephen Pegge, Managing Director of Commercial Finance, said “After being buffeted by uncertainty through 2019, SMEs were faced with the economic shock of the Covid-19 pandemic in the early months of 2020.”

“While the full effects of lockdown were not felt until the end of March and support measures were not fully operational until April, our data shows that many companies entered this period with some degree of financial headroom through a combination of existing facilities and deposits.”

“Nevertheless, there were some early actions to get the right financing in place to manage through the oncoming downturn. This was initially focused on new overdraft facilities, where we see some notable growth across all industry sectors and regions.”

“The finance industry has also been working closely with government, regulators and businesses as additional support schemes have been introduced to manage through this crisis and will continue to assist viable businesses as they plan for recovery.”