Alternative lenders are taking the wheel as the demand for larger loans by Britain’s small and medium-sized enterprises (SMEs) rises, according to a new poll of over 120 brokers.
The survey, conducted as part of fintech firm Iwoca’s SME Expert Index, found that small businesses in the fourth quarter of 2023 demanded loans of over £100,000 — a 15 per cent jump from the previous quarter.
Meanwhile, the survey suggests it is the alternative lenders who are beginning to “pick up the slack” left behind by the traditional banks who have tightened their lending criteria.
Nearly 77 per cent of brokers noted a reduced lending appetite from traditional banks, with 71 per cent deciding to bring the SME applications to the desks of alternative lenders instead.
Growth might be on the horizon for Britain’s SMEs, but the director of Commercial Growth at Iwoca, Colin Goldstein, told City A.M. the reluctance seen by traditional banks still creates a loss for the UK economy.
“The continued lack of support from the banks – over successive quarters – not only demonstrates the shifting SME lending landscape, but is also hindering a huge source of potential growth for the UK economy,” Goldstein said.
Alternative solutions have begun to surface in an effort to tackle the concerns – with the Federation of Small Business (FSB) most recently launching their new Funding Platform after discovering a slump in credit application approvals.
As the SME lending market continues its resilience, Goldstein said the numbers could be “hinting at a brighter future.”
Dan Guest, director of asset finance specialist TAFCO, said: “The market as a whole has bounced back after the continuous doom and gloom expected in 2023 – this has now filtered down to SMEs who have gained renewed confidence.
“At TAFCO we have noticed a rise in loans above £75,000 with a desire to settle higher rate debt, consolidate smaller loans and reduce outstanding terms on the back of an increased order book.
“We expect this to continue given the rate decrease across the market, from both unsecured and secured Hire Purchase debt.”