UK Finance has reported a return to normal lending for SMEs

UK Finance today released its latest Business Finance Review, which reports on the financial needs of SMEs.

The latest review shows that the trend of normal borrowing across SMEs in the first quarter of 2022 has continued to return slowly. We have seen a modest increase in demand for cash flows through overdrafts and invoice finance and asset-based lending – the consequences of both. The end of the Covid-19 restriction and the significant increase in cost pressures that many businesses are now facing.

Gross debt

After a significant increase in lending from the government’s Covid-19 loan scheme in 2020/21, the demand for money has been relatively muted in the past year, with nearly £ 5 billion in gross loans per quarter from high street banks.

The total debt to SMEs in the first quarter of 2022 was £ 4.9 billion, £ 0.1 billion more than in the previous quarter.


After two years of very low demand for overdrafts, the first component of approvals this quarter has increased, 23 percent more than the previous quarter. Although growth still leaves demand far below pre-epidemic trends.


SME deposits fell 1.4 percent to £ 266 billion in the quarter. This means that SMEs continue to have access to significant deposits with a total value of £ 69 billion, or 35 percent more than in February 2020.

SMEs are going to meet the obligation to repay the loan of their government loan scheme The steady flow of government-backed debt repayment is encouraging and the response suggests that, although some businesses are lagging behind, repayment issues are not as prominent now as many initially feared.

Stephen Pegg, managing director of Commercial Finance, said: “At the beginning of the year, activity across the economy continued to expand, but SMEs began to experience a pick-up in the economic headwind. While family finances have been the subject of concern, many businesses are also dealing with more uncertainty about the rapidly rising input costs and demand outlook.

“However, the use and demand for money by SMEs in early 2022 has changed slightly. Lending as a whole was broadly stable, but there has been a moderate pick-up in the approval and use of new overdrafts, along with a steady increase in invoices and assets. – Based loan advance. This is probably a response to the reopening of all parts of the economy as well as the increase in spending pressures.

“Our data show that SMEs are paying off government-backed loans, accessed during the epidemic, but it has not significantly reduced the financial headroom available through Flex in deposits and other arrangements.”

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