The value of non-emergency lending by banks to SMEs has dropped by 10% from £168bn in December 2019 to £152bn in December 2020, shows new research from ACP Altenburg Advisory, the debt advisory specialist.
ACP Altenburg Advisory says the research shows that once CBILS and BBLS loan schemes come to an end, SME businesses are likely to struggle to obtain finance from banks which is not partly or fully underwritten by the Government.
Total CBILS and BBLS lending to SMEs has ballooned from £4bn in April 2020, to a total of nearly £61bn that has been lent by December 2020*.
Once the CBILS and BBLS schemes come to an end, ACP Altenburg Advisory says banks may have limited appetite to lend and increase their exposure to the SME sector any further, given the significant increase in overall SME lending over the past 12 months when including the emergency lending.
Many banks are already reducing non-emergency lending to new to bank business customers. As CBILS and BBLS loans are underwritten by the Government, banks have been able to offer better terms for those loans than for ‘business as usual’ lends, which do not provide lenders with the same safety net.
Will Senbanjo, Partner at ACP Altenburg Advisory, says: “CBILS and BBLS loans have dominated banks’ lending activities to such an extent that they have limited capacity to write normal loans to SMEs. This means that businesses looking to grow may struggle to obtain the funds they need.
“SMEs looking to raise additional funds for growth in the months ahead may need to look at the alternative options, such as asset-based lending or alternative lender funding. Alternative lenders are open for business and are keen to deploy capital to well-managed businesses that have strong growth potential.”