Brokers report reduced SME lending appetite from high street banks

82% of SME finance brokers agree that major banks have reduced their appetite to fund SMEs, while nearly half of brokers (49%) report that more of their clients’ applications for finance were rejected compared to the previous month.

The new data of UK brokers who submitted over 2,000 SME finance applications in December also finds that funding experts think current macroeconomic pressures will have a worse impact on SMEs than the pandemic did.

The findings suggest demand for lending is set to increase dramatically over the next six months; four in every five brokers (79%) believe that demand for SME finance will rise, with just 6% predicting demand will fall.

Four in ten brokers (39%) say they’ve already seen a rise in applications for finance over the last month, with just one in seven brokers (14%) seeing applications fall.

One of the key drivers of rising demand for SME finance is the soaring cost of doing business. More than eight in ten brokers (84%) report their SME clients are concerned about their businesses surviving increased energy prices.

Over half (51%) also expect the potential recession’s impact on SMEs will be worse than that of the pandemic, twice the rate of those who think it will be better.

Colin Goldstein, commercial growth director at iwoca, said: “With brokers predicting that the impact of current macroeconomic pressures this year will be worse than the pandemic for small businesses, it’s clear that SMEs across the UK are in need of financial support. And – as our data shows – traditional banks just aren’t offering this.

“Alternative lenders are once again proving just how crucial they are to protecting small businesses from this financial shock. Our funding extension with Pollen Street Capital has helped us match increased appetite for SME finance, and now our focus will be to secure further financing so we can continue to service this rising demand.”