The whole worth of lending to UK companies has risen by £12bn to £533bn within the 9 months to finish Could 2022 as banks enhance their lending following a pointy fall on the finish of the CBILS and BBLS schemes, exhibits analysis by ACP Altenburg Advisory (“Altenburg”), the debt advisory specialists.
Altenburg says that the rise follows a £7bn drop within the worth of excellent lending in simply two months following the tip of Authorities assured mortgage schemes in March 2021 (see graph). The 100% Authorities assure beneath the BBLS scheme meant that the Authorities would successfully pay for any losses the banks would incur if the borrower defaulted. Beneath CBILS the Authorities supplied a assure protecting 80% of every mortgage.
Altenburg explains that banks took a extra cautious strategy to lending as soon as the Authorities ensures had been eliminated. Nevertheless, lending exercise has begun to rise once more since September 2021 regardless of the continuing disaster in Ukraine and the affect of upper inflation.
CBILS and BBLS lending had made up the vast majority of small and medium enterprise lending between April 2020 and Could 2021, representing 61% of complete lending to SMEs throughout this era.
Will Senbanjo, Companion at Altenburg, mentioned, “Companies shall be glad to see banks have began rising lending to UK companies following the removing of the CBILS and BBLS ensures.”
“These Authorities-backed schemes had been very important for protecting the move of lending going throughout the pandemic however as soon as they ended, financial institution funding was more durable to acquire for a number of months.”
“Whereas there are nonetheless important headwinds going through the economic system – principally rising rates of interest – there may be now extra financial institution lending on the market for companies trying to develop or make acquisitions.”
Borrowing continues to be reasonably priced for many UK companies regardless of the latest rise in rates of interest, provides Altenburg. Whereas BOE base price now stands at 1.25%, up from simply 0.1% six months in the past, they’re nonetheless low ranges in a historic context. Simply earlier than the monetary disaster in 2008, base charges stood at 5.75%.
With rates of interest nonetheless being aggressive, the chance for companies to make debt-funded acquisitions stays robust.
Senbanjo added, “There are many companies taking a look at M&A offers as they search to develop their enterprise’ general worth and attractiveness to future patrons. For companies in search of to borrow to attain this purpose, now might be a great time to lock in a low price on their lending.”
“Not each enterprise will discover financial institution lending is probably the most appropriate alternative for them. Some might discover borrowing is extra simply accessible via debt funds or different non-bank lenders. While these could also be at the next price than financial institution funding, the usually increased danger urge for food of non-bank lenders might enable a quicker tempo of progress, which can present a extra worthwhile general funding answer for enterprise house owners.”
