Consumer spending is at a record high, low-interest rates are fuelling consumer and business spending which is making SMEs confident for the year ahead. Could this overflowing optimism result in unprecedented levels of borrowing in 2017?
According to new results from the latest Zurich SME Risk Index, SME borrowing is set to soar above £50bn in 2017. It reports that British businesses are planning to borrow an average of £41,770 in 2017 which is 22 per cent higher than the figure in 2016 when small businesses borrowed on average £34,375. It says that as many as one in fifty SMEs are planning to borrow more than £1,000,000.
As a result, overall lending to SMEs could be well above £50bn this year.
More Companies Are Turning to Alternative Finance
SME confidence might be on the up but the Federation of Small Businesses’ Voice, Small Business Index for the fourth quarter of 2016, reports that credit conditions are worsening. It says small businesses report that credit availability and affordability have worsened in the final quarter of 2016. The share of small businesses successful in their credit applications was 62 per cent, compared to rates of more than 70 per cent in previous quarters and says more businesses are turning to alternative finance for capital with the number more than doubling 29.8 per cent from 13.7 per cent a year ago.
Interest in alternative finance and in particular peer-to-peer lending has escalated, the search term is the top 10 financial terms selected by financial content site Investopedia for 2016. The new mandatory bank referral scheme, which means businesses which have been turned down for lending by one of the major banks will automatically be referred to alternative finance providers’, will further charge this growing sector.
The scheme launched on 1st November 2016 and aims to match borrowers let down by their bank with alternative lending platforms.
The number of businesses that will ultimately be funded via the referral scheme in its inaugural year is unknown but at the time of the scheme’s launch, Conrad Ford, CEO of Funding Options, one of the participating platforms said that his firm “already sources tens of millions of pounds a year in vital alternative finance to hard-pressed UK firms,” and that this number could soon become hundreds of millions.