Bank lending plummets for London SMEs
The capital’s small businesses are abandoning traditional bank funding and embracing alternative finance, according to new figures from the British Bankers’ Association.
Whilst bank lending London’s SMEs has plummeted 40% in the last year, the capital’s companies raised an estimated £350m through peer-to-peer lending in 2015.
Statistics from the British Bankers’ Association show that the value of all newly approved loans and overdrafts to London SMEs in Q3 of 2015 was down 40% on 2014 totals, from £1.7bn to just over £1bn.
The average London SME has now less than £20,000 borrowed from their bank – a record low. In 2011 the average London business had £28,000 borrowed from their bank.
Roz O’Brien is the Company Director of Pixel Projects, a technology business born and based in London. The company provides cutting edge audio visual installations to the world’s largest internet companies.
“Working with banks can be a slower, cumbersome process; and that doesn’t always suit our business model”, said O’Brien. “The tech sector works quickly and efficiently, it’s a fast-paced environment; and our funding setup needs to reflect that. We can’t wait on a banks’ response to a funding application.”
Pixel Projects have raised over £9 million worth of project funding through peer-to-peer lender MarketInvoice. “It’s helped our business grow faster than we otherwise could have – we get funds quickly, as they’re needed”, said O’Brien.
“It feels only natural for us to embrace new technologies in how we finance our business,” O’Brien added. “It’s clear that the world of finance is changing, and tech companies like us should be the first to embrace this change.”
Anil Stocker, CEO & Co-founder of MarketInvoice commented: “Banks have grown increasingly reluctant to lend to SMEs, who see business lending as high risk, low return practise. Approvals for loans and overdrafts have been hard to come by – despite direct government incentives such as the Funding for Lending Scheme.”
“At the same time the city’s businesses have recognised peer-to-peer lending as a better, more efficient way of financing their growth. We’re supporting a lot of the fastest growing companies in the capital – dependable cashflow is rocket fuel for these businesses.”