Bank of England Credit Conditions Survey Q4 2018 – Funding for Medium Sized Businesses is Decreasing

The Bank of England regularly reports on business lending, the Credit Conditions Survey is released quarterly and provides an insight into how banks and building societies are providing capital to businesses.

In this article we’re going to look at a trend in lending to medium-sized businesses.

You can read the full report here and the key highlights are as follows:

• The availability of lending to medium-sized businesses fell slightly in Q4 2018.
• Demand from medium-sized businesses increased slightly in Q4 2018.
• Default rates increased for medium-sized businesses in Q4 2018.
• Default rates are expected to increase further for medium-sized businesses in Q1 2019.

The Environment for Medium-Sized Businesses

The Q4 2018 Credit Conditions Survey suggests that medium-sized businesses needing financing are finding it slightly harder to get it from traditional lenders.

Demand from medium-sized businesses increased by 5% in Q4 while default rates increased 10.4% in Q3 and 6.6% in Q4. Lenders reduced the availability of credit to medium-sized businesses by 5.9% in Q4. Approvals are expected to go down by 6.3% in Q1 2019.

While these changes are not drastic they highlight the difficulties medium-sized businesses face. Even with security, profitable and stable medium-sized businesses can find it hard to get funding from traditional lenders. They sometimes have characteristics that don’t fit the traditional lenders criteria, for example they may:

• Have security that is not easy to value.
• Have less and lower quality financial information available than larger businesses.
• Have less stable profitability.
• Operate in a niche or sector that lenders consider unstable.
• Have adverse financial events like CCJs.

Traditional lenders often aren’t able to deploy the resources to differentiate between well-run and stable medium-sized businesses and those that are a higher risk. This can leave medium-sized businesses that have a solid proposal unable to access funding.

How Reparo Finance Help Medium-Sized Businesses

Traditional lenders have a large volume of loan applications to process so a change in lending criteria may be applied broadly to avoid risk.

For example, they may discount medium-sized businesses that have any adverse financial information, or reject a loan application because of a certain gearing level in the balance sheet. This is the way traditional lenders screen businesses for risk – they need to apply criteria broadly because they simply don’t have the time to review every single application in detail.

But we do.

Our approach to lending is highly specific. Every business that approaches our team will have its business case reviewed by an expert who will look beyond the headline criteria and understand your proposition. When you contact Reparo you’ll notice it’s a little bit different to contacting a traditional lender:

• You’ll speak to an expert commercial lender that has at least ten years’ experience. They will spend the time understanding your business, why you need the loan and your level of affordability.
• We’ll look into your circumstances; if there are issues that mean traditional lenders won’t approve your loan we’ll take a closer look. For example, if you haven’t been trading for two years but the rest of your proposition is sound then we won’t exclude you on that one factor. You can read more details about how our vetting differs to traditional lenders here.
• Your contact will be clear with you on the prospect of a loan; we have our own lending criteria that needs to be met (more on that at the bottom of the article) but unlike traditional lenders we can make decisions quickly and give you feedback on why you’ve been accepted or rejected.
• We work to your timeframe – not ours. We specialise in completing loans in a very short space of time. Our processes are designed for speed – a large degree of importance is placed on internal communication so when a lending decision is made by our credit committee the important questions have already been addressed.
• Our speed is supported by partner organisations we work with like solicitors and valuation agents. They know we need to get loans completed quickly and offer a service that helps us work fast.

Our Loans

This is how we make loan approval decisions.

Reparo Loans

Asset-backed loans between £25,000 and £1m.

• Are the directors/owners trustworthy?
• Is there affordability and a clear plan for repayment / re-financing within 24 months?
• Is there an asset to secure against the loan, which can be independently valued?
• Is there a business case for the loan?
• Happy to lend alongside other finance providers.

Reparo Term Loan Product

Alongside our Reparo loan we’re now offering a longer term product.

• Up to £500,000 available.
• Up to five-year loan term.
• Property is required as security.
• Loan is amortised over the whole loan period.
• Up to six months interest only

FastTrack Finance

Loans of up to £50,000 that don’t necessarily require business assets as security.

• 52-week repayment period.
• Minimum loan of £5,000.
• Must be a UK resident and UK homeowner.
• Personal guarantee required from directors.
• If offering a personal guarantee equity in personal property must be three times the loan amount.

To discuss a loan between £10,000 and £1m, please get in touch with one of the team on sales@reparofinance.co.uk  or 0161 451 5714. You can find out more about us on our website:   www.reparofinance.co.uk