The Business Bank will not be able to keep up with alternative sources of small business finance – in fact, it has already been outgunned since its creation.
While Vince Cable’s Business Bank has released £300m in small business loans, since last September, over the same period, bridging finance has provided £354 of short-term secured loans to SMEs.
“Government aspirations to lend to small businesses are noble, but could be misguided,” says Duncan Kreeger, director of peer-to-peer bridging lender West One Loans.
“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 research shows that 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 new SME finance will have outpaced the flagship government initiative to the tune of 58 per cent, or an additional £173m, by October this year.
According to the latest West One Broker Sentiment Survey, intermediaries are budgeting for 36 per cent annual growth in total gross bridging lending.
In total, the industry provided £1.6bn in gross lending in the year to Q1 2013, with business loans representing just over 21 per cent of the wider bridging industry, with secured loans for property-related transactions making up the rest.
The proportion of borrowers choosing to use secured loans for business purposes has kept up with the size of the total bridging industry, growing as a proportion of funding as well as in absolute terms, the research shows.
“Bridging is providing small businesses across the UK with over £1 million in finance every day. It’s no surprise that we’re outpacing the government’s business bank – we’ve been expanding our lending to these sorts of small, locally important firms for years now,” adds Kreeger.
“This industry’s doing what the high street has failed to do since 2007. Bridging finance is expanding at a steady double-digit pace – and at the same time it’s becoming more affordable for our customers.”
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