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Small Business Finance Markets 2020/21 – “a timely and comprehensive review of finance markets for smaller businesses.”

Two colleagues at PKF Francis Clark, Helen Han and Fred Lucken, attended the virtual launch of the British Business Bank’s report into “Small Business Finance” earlier this week.  They have passed on the key points to me and I pick up on these and some other points from the report itself below.

Key points

Key points from this the 7th annual report issued by the British Business Bank include:

  • 45% of SMEs applied for external financial support in 2020, compared to 13% in 2019
  • Record values of lending, primarily through the government’s emergency schemes
  • Fall in demand for repayable external finance
  • Many businesses find themselves with substantial debts -perhaps for the first time
  • Record cash balances indicate a sizeable number of businesses well positioned to take advantage of opportunities as the economy begins to recover
  • Business Finance Survey showed:
    • 33% of businesses expect to shrink over the next year
    • 21% of businesses expect to grow over the next year
  • Positive indicators that, unlike the period following the credit crunch in 2008-09, there will be sufficient supply of finance to meet demand (see further below)
  • Start Up Loans programme has seen a record £126m of funding drawn down in 2020
  • The 22% quarter on quarter fall in business investment in Q2 2020 was the largest quarter fall on record
  • Gross bank lending (excluding overdrafts) to SMEs was £103bn; 82% higher than in 2019
  • Equity investment values reached record levels in 2020 up 9% to £8.8bn (see further below).

A full copy of the report can be accessed via link on British Business Bank’s website page (where you can also find an infographic summarising some of key points).

The report also contains some interesting statistics on the use of Covid-19 finance; a section on “expectations for demand and supply in 2021” and other useful information.  Well worth a read…

The supply of finance

The report bases its assessment that supply of finance will be sufficient to meet demand on the following:

  • Banks – look to have sufficient capital available, could be well placed to provide growth finance
  • Non-bank lenders and their investors – show signs that they are ready to resume a greater level of activity
  • Venture capital – record fundraising in 2020 suggest capital to invest in high-growth companies in 2021 and beyond.

The only aspect I would finesse above is the reference to non-bank lenders which, the above extract from the report suggests, did not get involved in government’s emergency schemes – we are aware of a number who did (and this is indeed picked up later in the report).

PKF Francis Clark

One quote from the report resonated with me in particular “At this crucial time for the economy, it has never been more important to have a deep understanding and knowledge of the finance markets which supports UK businesses”.

I like to think that I and my colleagues strive to understand the range of funding options available to SMEs and share our knowledge with clients and wider community through  a number of forums including blogs, funding workshops, “Finance in” events and other events.

I was also pleased to read that equity investment is on the up as this is something I have been predicting!  I anticipate more equity investment again in 2021 and anyone interested in finding out more about equity funding should attend our next “Conversation Over Coffee” event is on that very topic and will feature:  British Business Bank; CIOSIF. Michelmores (focusing on their MAINstream Business Angel network) and an Owner Manger who has just completed a successful equity raise).

FEATURING: Nick Tippett
Nick is a Director in the Corporate Finance team. He focuses on business sales, management buyouts, acquisitions and both debt and equity finance raising. He… read more
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