The government’s Business Bank will not be able to keep up with alternative sources of small business finance – and has already been outgunned since its creation – West One Loans’ latest Bridging Index has stated.
Bridging finance provided £354 million in completed business loans to small and medium-sized enterprises (SMEs), outperforming the Business Bank.
Over the same period the Business Bank has released £300 million in small business loans, with complete take-up of the finance expected no sooner than the middle of Q3 this year.
Even if the entirety of initial funds from the Business Bank are transferred directly to SMEs within a single quarter, lending by alternative sources of SME finance will have outpaced the flagship government initiative to the tune of 58 per cent, or an additional £173 million, by October this year.
Duncan Kreeger, Director of peer-to-peer bridging lender West One Loans, commented: “For half a decade small businesses have been missing out. Banks may as well have shredded the majority of quality business plans they’ve received. And for all that time the largest banks have been touting misleading excuses about a lack of demand. It simply isn’t the case. There’s enormous demand from small firms for vital investment – demonstrated clearly by the rise of alternative finance.
“Government aspirations to lend to small businesses are noble, but could be misguided. In the longer-term, the Business Bank could be doomed to failure just by a lack of firepower. And right now it’s already proving unwieldy. Just as the biggest corporate lenders are seeing their market share slip away, the Business Bank is being outmaneuvered by nimbler players.
“The Business Secretary claims setting up the new institution needs to be slow, and that it’s necessarily very complex. But if so, then the new Business Bank is just a miniature re-run of the old business model – one of stalling lending levels and near monopolies leading to poor customer service.”
According to the latest West One Broker Sentiment Survey, intermediaries are budgeting for 36 per cent annual growth in total gross bridging lending. Of this total figure, business bridging specifically is forecast to more than keep up with other areas.
In total, the industry provided £1.61 billion in gross lending in the year to Q1 2013, according to the latest West One Bridging Index. Business loans represent just over 21 per cent of the wider bridging industry, with secured loans for property-related purposes making up the rest.
The proportion of borrowers choosing to use secured loans for business purposes has more than kept up with the size of the total bridging industry, growing as a proportion of funding as well as in absolute terms. Six months ago, in November 2012, business finance had only just broken the 20 per cent mark of all bridging lending.
Alongside greater availability of bridging finance, borrowing rates are set to decrease too. A record 57 per cent of intermediaries predict borrowing costs to fall, over eight times the number expecting higher rates (7 per cent). Previously, 45 per cent of bridging intermediaries expected lower interest rates, in November last year.
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