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Alternative finance surpasses 2012 figures

Sam Cordon

November 1, 2013

In just the first nine months of 2013, short-term secured loans for small and medium sized firms totalled more than a quarter of a billion.

Business lending now makes up approximately 20% of lending in the bridging industry, which equates to £255m for the first nine months of 2013, based on the latest industry data. This compares to an annual total of £252m for the whole of 2012.

Based on current trends, short-term secured loans will provide SMEs with over one third of a billion pounds in business finance this year. An expected £342m in 2013 represents 42% annual growth from 2012.

Duncan Kreeger, director at West One Loans, said: “Economic optimism isn’t just a vague feeling. We’re definitely feeling the heat of real, solid growth in the office every day.

“But while the UK economy might be 1.5% bigger than a year ago, mainstream business loans have gone twice as far in the wrong direction – down 3.2% over the same twelve months.

“If small firms had even the same access to mainstream loans they enjoyed a year ago, we could have seen even better numbers for UK economic growth. Sadly, due to some lenders, growth is still fighting against a receding tide of most commercial finance.

“Fortunately a surge of alternative finance options has developed and is growing to fill the gap. Commercial bridging loans are an increasingly vital option for the business community – an essential element in the story of economic growth. Small firms across the UK have both the security to underpin these loans and the profitable business plans to make the most of commercial finance.”

On an individual basis, 90% of financial intermediaries report at least some growth in short-term secured loans for small business purposes, up from 83% six months ago.

Approximately one year ago the same measure stood at 82% of brokers.

Kreeger said: “Business lending isn’t just vital for the economy. It’s becoming an essential tool for brokers too. Since we started asking this particular question, there’s been a strong but stable majority reporting more lending to small businesses.

“But now the sheer volume of cases is having a clear effect on the market. Commercial enquiries are sweeping across the whole industry and nearly every broker is sharing the proceeds of that growth.”

Brokers also want more options for commercial loans, with a record 42% listing this as their top priority. This compares to one third (32%) six months ago, and one quarter (26%) in November 2012.

Kreeger added: “It’s an exciting time for potential borrowers too. Short-term secured loans are becoming more flexible and more closely personalised, as well as better understood by the experts.

“Intermediaries are critical in explaining new developments and finding the best option. So as demand for business loans continues to grow it’s encouraging that brokers share the excitement about commercial lending.”

Across all types of borrower, intermediaries reported average volume growth of 54% compared to September last year, up from 49% six months ago, and 46% reported year-on-year growth approximately one year ago in August 2012.

Growth in total lending volumes via brokers comes in the context of steady growth in industry lending when measured by value. Gross bridging lending has grown by 37% over the last twelve months, now totalling £1.79bn per year, according to the latest West One Bridging Index.


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