1st December 2016

Bank Support for SMEs – 3rd Quarter 2016

Mike Conroy, the BBA’s Managing Director for Business Finance, said:

“The BBA’s latest data show that £5.6bn of lending was approved for SMEs in the third quarter. So far this year we have continued to see a modest expansion in net lending.

“Application approval rates remain very healthy and over 80% of businesses are getting finance when they apply. But there is clearly lower demand for finance from businesses overall than in the same quarter a year ago. ‎This subdued demand reflects reduced or postponed investment plans and continued deposit holding, particularly by smaller firms, as they operate within an uncertain trading environment. However, we are seeing regional differences. In Scotland, Wales, Yorkshire and the North West, demand for credit has increased moderately compared to the same period last year.”

SME net borrowing

SME borrowing at the end of Q3 2016 stood at £108.5bn, of which structured term loans were £86.3bn, overdrafts were £9.6bn and facilities available but undrawn were £12.5bn.

This level of support for SMEs has been constant over the past year, with small monthly net increases seen for over more than a year now. In the latest quarter, new loans less repayments resulted in overall net lending of £0.5bn.

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

Number of loan & overdraft applications and percentage approved

Compared to Q3 2015, there were 13% fewer loan applications, with numbers dropping from 35,767 to 31,596 in Q3 2016.

Overdraft applications remained broadly unchanged to the same quarter a year earlier, staying at 43,047 compared to 43,416.

Approval rates in the quarter were:
Smaller businesses – Loans 80%, Overdrafts 77%
Medium businesses – Loans 89%, Overdrafts 97%

Value of loan & overdraft application approvals

Reflecting the lower number of loan applications in Q3, banks approved £5.6bn of new loan & overdraft facilities, some 12% less than in the same quarter of 2015.

£1.7bn of loan facilities and £0.5bn of overdraft facilities were approved for smaller businesses. £2.9bn of loan facilities and £0.6bn of overdraft facilities were approved for medium businesses.

The average loan value approved for smaller businesses in the quarter was little changed at £86,700 while the average for medium sized businesses rose to £434,200.

SME deposit account balances

Cash held by SMEs in current and deposit accounts totalled £170.4bn at the end of Q3, some 5% more than a year earlier.

£101.1bn of cash is held in curent accounts.
£69.3bn of cash is held in deposit accounts