BBB: 89% of businesses sought external financial support in 2020

An estimated 89% of businesses sought external financial support in 2020, according to The British Business Bank (BBB).  


Data collected by the state-owned economic development bank shows this required support was accountable to the COVID-19 pandemic.

It outlined that 75% of these small to medium enterprises (SMEs) sought external financial support to help with cashflow.

A further 8% sought finance, at least in part, to pivot or change their business model and 7% to invest in the digital capability of their business.

The majority of sectors saw between 20% and 30% of their SME population take up a loan during the pandemic.

British Business Bank data also shows that across both the Bounce Back Loans Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS), 59% of SMEs accessing government-backed finance schemes have borrowed more than 20% of their reported turnover.

Turnover decline rates for businesses of all sizes were over three times their respective prior five-year average, last year.

The smallest SMEs have experienced the largest declines in turnover.

In Q3, 49% of zero employee firms reported a fall in turnover over the previous 12 months compared to 38% of businesses with 50 to 249 employees.

Additionally, a significant proportion of finance facilities taken out because of COVID-19 remained unspent by Q3 2020.

Only 23% of SMEs had spent all of their facilities, and 19% reported they had not spent any.

Looking to UK Finance data, a reduction in operating expenses combined with significant government financial support and precautionary savings led to a 20% rise in deposit holdings since the start of the year, to a record £252bn.

In Q4 2020, 37% of smaller businesses expected to stay the same size over the next 12 months, 33% expected to shrink, and 4% to sell or to close.

Only one in five (21%) were expecting to grow, compared to 28% the previous year.

Small and medium sized businesses were most likely to expect to grow at 35% and 38% respectively, compared to 21% overall.

SMEs in business services at 25% and production at 23% were most optimistic about their prospects for growth over the next year, while businesses in construction and other services sectors least optimistic both at 17%.

The British Business Bank believes there could be significant further demand for funding in 2021, as businesses continue to recover from the effects of the pandemic.

Chirag Shah, chief executive of Nucleus Commercial Finance, said: “The British Business Bank and the lending industry have played a vital role in ensuring SMEs have had access to the crucial funds they need to survive during the pandemic.

“Over the past 12 months we have seen fintech and alternative lenders move into the mainstream due to their ability to provide SMEs with funds quickly and, as a result, more businesses now turn to our industry as their first point of call.

“The impact of COVID-19 on SMEs will be long lasting, so we need to see continued innovation across the industry to provide creative solutions which suit businesses’ individual needs.

“We firmly believe fintech lenders are best positioned in the industry to support SMEs thanks to the ability to design flexible products, powered by cutting-edge technology.

“Future innovation will further reinforce that fintechs can no longer be considered an alternative; we are the true mainstream lender.”

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