Is the lending landscape evolving for SMEs? Moorfields investigates the subject

With UK businesses undoubtedly dismayed by the news that lending to SMEs has failed to be lifted by either the Funding for Lending Scheme or the government’s Enterprise Finance Guarantee (EFG) scheme, small business owners in the UK may be questioning if the finance pipeline is evolving to meet their needs.


However, while looking to the big four banks, Barclays, RBS, HSBC and Lloyds, to provide the cash-injection they need may leave many SMEs feeling that they are facing an uphill battle, earlier this month Bank of England Governor Sir Mervyn King threw a curve ball into the mix.


King highlighted an alternative source of lending to SMEs, after pointing a small business owner in the direction of a ‘so-called’ challenger bank.


Hearing that an SME owner could not secure the finance he needed from his existing bank, King recommended that he seek out the help of a new bank such as Handelsbanken – a Swedish bank with more than 100 branches in the UK.


Is this a new strategy for SME lending?


Describing its approach to finance for businesses, the bank’s website states: “We take the time to understand your business today as well as your strategy for future success.”


Sir Mervyn’s comments sparked a flurry of interest in the bank, and other ‘challenger’ banks Aldermore, Shawbrook Bank and Metro are also attracting increasing custom from SMEs after building a reputation for customer service and rapid loan decisions.


In 2012, Aldermore lent its 12,000 SME customers in the UK more than £1bn.


However, while challenger banks have the potential to have a significant bearing on the SME lending landscape, a recent straw poll of small business owners at a round-table event revealed that none were aware of their existence, revealing that these banks may have some work to do in order to raise their profile.


The government has also recently put its weight behind alternative lenders, with the Department of Business, Innovation and Skills (BIS) announcing that it is helping to support the growth of UK SMEs, with £32m of finance set to be shared amongst three new lenders.


In a bid to offer SMEs alternatives to traditional bank lending, the three lenders – MarketInvoice, URICA and Beechbrook Capital – will receive respective figures of £5m, 10m and £17m.


For advice on funding for your business or any other aspects of your business, you may wish to speak to a business restructuring specialist.


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143.

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