SMEs have ‘untapped potential’ for specialist lending sector

According to a survey from Recognise Bank, nearly eight out of 10 respondents said they were confident or very confident their business would see an uplift in trade in the next three months.

Many business owners are wanting to invest in their business, either by purchasing new equipment, personal protective equipment (PPE), stock, adding products and services, investing in online trading and recruiting staff.

However, around 14 per cent of respondents said their main bank was never able to support their borrowing needs.

Just a third said their banks were always able to support their borrowing needs, while an additional third this help was only available to them sometimes.

Around six per cent of those surveyed said they preferred to borrow from an alternative lender over their own bank, which Recognise Bank said could point to dissatisfaction amongst respondents.

The ways in which capital was raised also changed over the summer.

The use of overdrafts to fund investment increased between May and August, from seven per cent to 12 per cent. Credit cards also grew in use from eight per cent in May to 11 per cent in August.

SMEs were also less likely to use government loans for support, as this figure dropped from 17 per cent in May to 11 per cent in August.

Angela Norman, Recognise Bank’s corporate development head, said: “Looking at the number of SMEs in our research who said they were using overdrafts and credit cards for their borrowing, it would suggest that many small businesses are unaware of alternatives to their current business bank, or they might not realise the funding options that are available to them.

“There is definitely untapped potential here and brokers have an important role in educating SMEs and helping them find suitable funding.”

The survey was conducted in August and collated responses from 500 decision makers in SMEs.