Leading SME lending portal updates on Coronavirus loan volumes
Funding Xchange, the leading platform to connect small business borrowers with over 80 lenders, and manager of the largest dynamic data set of small business loan referrals from banks has published its latest ‘Small Business Loans Update’.
UK Finance has announced a 118% increase of approved CBILS loans versus one week ago. Thanks to the huge efforts of bank staff, funding has now been made available to well over 16,000 businesses. Funding is increasing by well over £250M in approved CBILS loans per day. The Herculean efforts of the British Business Bank and accredited banks and lenders mean that funding is flowing. The average loan size of just under £170,000 suggests that businesses with £2M+ turnover and access to bank relationship managers are benefiting.
Our data suggests smaller businesses continue to struggle to get the funding they need as several challenges remain:
• Impact of the crisis is spreading – stronger businesses are unable to access finance. In the first two weeks following the lock-down, vulnerable businesses were the predominant users of the referral process. In April, we are seeing a swing towards businesses with a stronger profile – 42% of referred businesses meet the eligibility criteria of other lenders, versus 36% in March.
• Unmet demand is greatest for micro-loans. 70% of businesses were seeking less than £15,000 in March–this share decreased to 60% in April compared.
• Sectors most challenged by the crisis, including retail, business administration and accommodation, appear to find it particularly challenging to access funding. The share of these sectors significantly over-represented in referral data since the beginning of the crisis.
• The increased interest in lending has not seen a parallel increase in mandatory referrals, suggesting that the mandatory referral process has not worked as a safety valve. Increase in referrals has been 2x since February – which appears to track well below the increased demand for funding.
• Access to liquidity remains challenging for many micro businesses: Some large banks (including Barclays, Metro and TBS) are not accepting applications for less than £25,000. A minority of the banks are accepting applications from new-to-bank customers. This leaves over 1.9 Million businesses with turnover of less than £250,000 without access to finance as these businesses are typically only able to access 10-15% of their turnover in debt funding. It is estimated that 20% or 350,000 of these businesses require access to funding just in April. Yet, with 16,000 approved CBILS loans, at best fewer than 5% of these businesses have been funded through CBILS.
• Non-CBILS lending has largely ceased for smaller businesses. Customers want the advantageous terms offered by CBILS solutions – and avoid products that are not providing the no-interest period. Most lenders have also withdrawn liquidity as they are either awaiting accreditation or are solely focused on managing their back book. The NACFB suggested on April 22 that the success rate for businesses seeking funding has been less than 3% (in line with a BCC survey that suggested a 2% funded rate.
Creating access to funding for smaller businesses will require the accreditation of more lenders. It also requires these lenders to have the capacity to make new lending available – they need appropriate support for back-books that have been impacted by the crisis and access to fresh liquidity. The different support schemes are making good progress in creating more liquidity.
With more than 70 lenders likely accredited to the CBILS, SMEs will also require assistance in safely, and quickly accessing lenders that will fund them. Without appropriate signposting, too many businesses are struggling to find the funding they require, and lender processes are clogged up with ineligible lending enquiries. Delivering simple, speedy access to the right solutions requires an effective triage solution that safeguards businesses and delivers efficiencies to lenders by eliminating ineligible enquiries and establishing eligibility of the businesses for specific solutions.