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Bank Lending

Lloyds £1 billion SME fund - lifeline for very small businesses but most SMEs still risk averse to bank lending

By CreditMan Tuesday, February 4, 2014

Commenting on the announcement by Lloyds Bank who have pledged £1 billion in lending for SMEs, Iain Moffatt, UK Head of Regions at KPMG said : “The announcement by Lloyds is yet another positive sign that the economy is getting back on its feet and that growth is the order of the day. However, a recent poll of UK SMEs by KPMG found that the many mid market businesses are not willing to take on any risk associated with external finance and leverage their business. This is an indication that companies remain risk averse and still uncertain about a banking market which some view as being unsupportive to the SME sector during the recession.

“This fund could be a lifeline to those very small businesses who have previously been viewed as more risky in general terms than larger businesses, and continue to struggle following half a decade of economic stagnation where access to funding was all but extinct. Despite positive economic signs, many SMEs are not entirely convinced that the economy is out of the woods yet with two-thirds claiming that ultimately the economic conditions would be the biggest impediment to their growth. If the economy doesn’t do as well as predicted or interest rates increase too early, the risk of potential insolvency could be heightened for many businesses who intend to fund growth via new debt so it is important that any small business looking to borrow money would be able to accommodate bumps in the road as the economy repairs itself.”