SME lending ‘not in a liquidity crisis’

There is not a liquidity crisis when it comes to SME lending, according to a panel of commercial lenders taking part in the latest Open Banking Expo live panel debate. 

Ylva Ortengren, chief operating officer at Simply, said that despite the change in the government-backed loan schemes, the support from lenders for SMEs “is still going to be out there”. 

During the discussion on ‘The future of SME lending in a post-Covid world’, in association with Equifax, the panel was asked what SMEs’ main concerns are now that the UK government’s Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) are coming to an end. 

Ortengren added: “The Bounce Back Loans and the CBILS were a support line for many businesses, but they were not a lifeline.  

“We’re not in a liquidity crisis for the SME market – far from it, there’s quite a lot of liquidity out there. The thing that makes it more complicated now is being able to actually get that money out to the right SMEs in the way that works for the SME. Funding needs to be made available to make sure they can build their businesses and grow as they want to.” 

Emma Steeley, CEO of AccountScore, an Equifax company, agreed: “There is no doubt about it that SMEs do have concerns. But, like Ylva says, there is not a liquidity crisis when it comes to lending to SMEs, the funds are there and they are available. It’s about streamlining that access and getting it to the SMEs in the most efficient way as they need it.” 

Also on the panel were Tony Mott, senior commercial consultant at Equifax UK, Jamie Stewart, co-founder of Think Business Loans and Katrin Herrling, chief executive of Funding Xchange. 

Mott said prior to the pandemic, traditional forms of finance had been a “closed shop” for SMEs. 

He added that around 70% of businesses that did obtain BBLS “it was their very first form of financial lending”.  

“It was an introduction to the financial market in commercial terms for many SMEs. That should be a springboard for post-Covid lending,” said Mott. 

According to Stewart of Think Business Loans, the biggest concern for SMEs is being access to affordable finance, or what he called “the safety blanket effect”.  

“Having cash reserves in uncertain times is a life saver because of things like missed payments. The affordable nature of the government funding lines meant it was a cost-effective way to mitigate that uncertainty,” he explained. 

For Herrling, it is the lack of support for the “micro end of the lending spectrum” that is the biggest concern, which has historically not been well served by the banks. 

“We often forget that more than 95% of businesses in the UK turnover less than £150,000 a year. The vast majority of businesses in the UK are at the very small end,” she said. 

Click here to watch the live panel debate on demand and find out what the panel had to say about the difficulties of assessing credit risk post-Covid and how commercial lenders are using Open Banking to build a more accurate picture of SMEs’ financial circumstances.