15th July 2016

Bank Support for SMEs – 1st Quarter 2016

Commenting on the latest BBA figures, Mike Conroy, Managing Director, Business Finance said:

“The BBA’s data for Q1 2016 are pre-Referendum but show some nervousness ahead of the result. For example, Q1 showed high lending approval rates against a backdrop of reduced demand, with some £6 billion of new lending facilities approved and the level of lending support has been stable over the past year. It is difficult to predict the impact of Brexit on commercial lending, but as Mark Carney said last week, the Bank of England’s reduction in capital requirements is designed to support bank lending of up to £150 billionn to households and businesses in the months ahead despite interest rates being held today.

“We are continuing to see small and medium-sized businesses build up their cash deposits which, alongside reduced credit applications, suggests that SMEs are uncertain about their own business growth in the uncertain domestic and global economic environment. While SMEs may be finding the uncertainties tough, bank lending will nevertheless continue to be available through 2016 to support their businesses.”

SME net borrowing

SME borrowing facilities at the end of Q1 2016 stood at £108.5bn, of which structured terms loans were £87.2bn, overdrafts were £9.6bn and facilities available but undrawn were £11.7bn.

This overall level of support for SMEs has remained fairly constant over the past year.

In the quarter, there was £1.8bn of new loans to smaller businesses and £5.0bn to medium-sized businesses. Repayments of £1.9bn from smaller businesses £4.4bn from medium businesses, resulted in overall net lending of £0.5bn.

Overdraft levels remained unchanged at £4.5bn for smaller businesses and £5.1bn for medium-sized businesses.

Number of loan & overdraft applications and percentage approved

Compared to Q1 2015, SMEs saw 10% fewer loan applications, with numbers dropping from 43,287 to 39,422 in Q1 2016.

Overdraft applications were 2% higher than in the same quarter a year earlier, rising to 48,735 compared to 47,916.

Approval rates in Q1 were:
Smaller businesses – Loans 81%, Overdrafts 78%
Medium businesses – Loans 90%, Overdrafts 95%

Value of loan & overdraft application approvals

In Q1, banks approved £6.1bn of new loan & overdraft facilities. This was 18% lower than in the same quarter of 2015.

£2.0bn of loan facilities and £0.5bn of overdraft facilities were approved for smaller businesses.

£3.0bn of loan facilities and £0.7bn of overdraft facilities were approved for medium businesses.

The average loan value approved for smaller businesses in Q1 was £78,230 while the average for medium-sized businesses rose to £391,000

SME deposit account balances

Cash held by SMEs in current and deposit accounts totalled £162.1bn at the end of Q1, some 6% higher than a year earlier.

£94.7bn of cash is held in curent accounts.
£67.4bn of cash is held in deposit accounts.