SME Borrowing Levels ‘More Than Doubled in 2020’

The scale at which SMEs borrowed last year vastly outstripped comparable figures for the previous 12 months.

According to the banking industry trade body UK Finance, twice as much money was borrowed by SMEs during the first three quarters of 2020 as was taken on as loans by businesses throughout 2019.

Gross lending to SMEs in the first three quarters of last year was worth around £54 billion, with much of that total accounted for by loans taken on primarily to help businesses cope with the impacts of the coronavirus crisis.

Indeed, a significant proportion of the loans approved by lenders last year were distributed with the backing of the UK government through the Bounce Back Loan and Coronavirus Business Interruption Schemes.

Those two schemes, which meant loans were offered with low interest rates and were largely guaranteed by public funds, helped to dramatically increase the scale of demand for credit among SMEs right across the country.

With the initial virus outbreak hitting the UK in March 2020, the second and third quarters of the year saw huge amounts of money being taken on as loans by small and medium-sized firms.

In fact, according to UK Finance, the scale of borrowing taken on by SMEs in those two quarters was some £36 billion more than during the same period in 2019.

Businesses in the retail, hospitality, travel, tourism and construction sectors were among those taking on the most debt during the second and third quarters of last year.

More recently, hundreds of millions of pounds worth of loans have also been taken on by businesses through the ‘top-up’ options made available via the government-backed Bounce Back Loans Scheme.

“Gross lending in the first three quarters of last year was more than double the annual total in 2019, boosted by over 1.5 million businesses borrowing with government-guaranteed facilities,” noted Stephen Page from UK Finance.

“Approvals of overdraft facilities rose significantly at the start of last year but demand in the second and third quarters moved towards loans,” he added.

“SMEs can now ‘top-up’ their Bounce Back Loan to the maximum of £50,000 or 25 per cent of their turnover if lower, with the application deadline for the schemes now running until the end of March 2021.

“This extension and the wider support of the industry will help businesses access the finance they need as the pandemic continues to affect the economy.”