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Volume of loans granted could have “devastating” impact on traditional lending

The volume of government loans granted to help SMEs through the COVID-19 crisis could have a “devastating” impact on the availability of traditional lending, according to Allica Bank.

Research from Allica Bank suggests that SMEs could be starved of funding to fuel future growth.

This is as a result of lending capacity being used primarily in coronavirus business interruption and bounce back loans

A survey conducted by the bank shows that 82% of brokers said they have seen a reduction in the supply of finance from business lenders, and 56% described the reduction as significant.

The majority of commercial mortgage brokers think that it is unlikely banks and non-bank lenders will be able to meet the future needs of SMEs for a range of crucial financial products in 2021

This is particularly prevalent for commercial mortgages at 93%, unsecured loans at 86%, and secured loans at 81%.

Furthermore, 70% of brokers said they thought it is likely that SMEs will be under-served by banks and non-bank lenders for this form of funding.

Nick Baker, head of intermediaries at Allica Bank, said: “The government lending initiatives have been a lifesaver, but they have also tied up the capacity of many lenders.

“This means they are unable to service the more ‘traditional’ funding needs of businesses not seeking COVID-19 relief, such as those looking to grow.

“Businesses like this will be central to the UK’s economic recovery, and we need to make sure they have access to adequate funding now to spur long-term growth.

“We want to reassure our broker partners and customers that Allica is open for business and in a strong position to continue to provide financial support for established SMEs.”

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