In 2019 we provided over £200 million of funding for mid-sized businesses, almost double 2018's previous record. In total we have now lent more than £580 million to small and mid-sized businesses across the UK.
Is access to credit from banks tightening for SMEs?
It is interesting to see that many of the high street banks announce that they plan to lend billions of pounds to support UK SMEs. It reads well as a headline, but does it stack up as a fact?
Every quarter the Bank of England publishes its Bank Liabilities Survey, a questionnaire that assesses the availability of finance to UK small and medium-sized businesses.
Banks are certainly not practising what they preach when it comes to supporting mid-sized businesses, the growth engine of the economy.
The most recent survey that looks at the final quarter of 2019 shows that access to credit from banks is tightening. The proportion of banks expecting to reduce SME lending now outweighs those expecting to increase lending by a margin of 11.3 per cent. In the first quarter of 2020, it’s expected to hit 16.3 per cent.
This is alarming. Banks are known to squeeze credit if they expect a downturn in the economy. However, if we are expected to grow out of a potential recession, then we need strong private sector growth.
ThinCats is different from most alternative finance lenders as we focus on mid-sized businesses: the “M”s of SMEs. It’s a space that’s generally too small for the traditional banks and direct lending funds, and too complex for the online only lenders.
Part of the solution to meeting the funding gap for mid-sized businesses is through the use of more institutional capital rather than capital from banks. Institutional investors have billions of pounds to invest on behalf of their clients and are looking for alternative investments that generate a regular income.
By providing institutional investors with access to funding mid-sized businesses, we not only help the institutions achieve their investment objectives, we also help UK businesses achieve their growth ambitions.
We have attracted £700 million of institutional capital for funding SMEs and expect this to increase as we develop a longer-term performance record for institutional investors.