Applications To Banks For Business Loans Fell In 2016

According to the British Bankers’ Association (BBA), there was a reduction of 9% seen in the number of loan applications received from SME businesses seeking finance from banks last year when the figures are compared with those of 2015. This drop could be due to a number of reasons such as businesses having surplus cash in their bank accounts that they could use rather than take on bank borrowing or it could be making use of peer to peer lending platforms or leasing.

In 2016, the number of loan applications to banks in the UK fell by 9% when compared with 2015.
The banks saw a reduction in the number of loan applications from SMEs in 2016 when compared with the previous year.

Having said that, it is interesting that there was a net increase in the amount lent by way of structured loans of £1.5 billion to SMEs in 2016 by banks. Borrowing to SMEs by banks amounted to £109.9 billion as at the end of last year. This figure was made up of overdraft facilities of £9 billion, structured term loans of £85.3 billion and borrowing facilities awaiting drawdown of £15.5 billion.

In the last quarter of 2016, 76% of overdraft applications made by smaller businesses were approved and 79% of loan applications were approved. In respect of medium size businesses, 96% of overdraft applications were approved and 88% of loan applications were approved. The average amount of a loan that was approved in quarter 4 of 2016 to a smaller business was £72,672 and for medium sized businesses the figure was £440,995.

It is also interesting that in December 2016 there were 30,329 loan applications made by SMEs to banks. This monthly figure is the lowest on record.

The reduction of 9% seen in business loan applications made by SMEs last year to banks is a sizeable percentage and is perhaps a reflection of the competition that the banks are faced with from other providers of business finance on an ever increasing basis. The use of peer to peer lending platforms by businesses seeking finance here in the UK is just one example of such alternative providers.

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