2 percent of UK small businesses borrowed from banks in H1 2017
(22 February 2018 – United Kingdom) Small businesses in the United Kingdom say they would rather sacrifice growth than borrow money from a bank, while also seeking out other sources of funding according to new study by British Business Bank (BBB).
The state-owned lender, which provides more than £4 billion of loans to UK businesses, found in its latest annual report into the small business finance market that seven in 10 small companies would choose not to borrow from a bank, even if that meant they did not expand.
The bank said small businesses’ reluctance to borrow had “become entrenched” last year. Less than two percent (1.7 percent) of small firms sought new loans in the first half of 2017 - down from 2.9 percent five years ago and representing a record low since the report began in 2011.
While total lending to small firms by high street banks remained flat, at £165 billion last year, demand for alternative forms of finance surged, albeit from a lower base.
The research found that equity investment rose by 79 percent to £4.5 billion, while asset finance increased to 12 percent to £18.6 billion, and a small businesses reported a 51 percent increase in peer-to-peer lending, borrowing £1.8 billion in 2017.
Keith Morgan, chief executive of the British Business Bank said, “If you look at where we are compared to five years ago, small business owners are more in control of their businesses."
"It could be that people have been through a financial crisis and have been rebuilding their balance sheets. Over the five-year period there has been a healthy growth in cash balances at small firms.”
The report follows the launch of a Parliament Treasury inquiry into the small business lending market earlier this month.