The Scottish Pacific SME Growth Index highlights two significant trends in how SMEs are financing their businesses.
Firstly, the big four bank stranglehold on the SME segment is loosening with non-bank lenders starting to make inroads. Of the businesses surveyed by Scottish Pacific, 32.1% of SMEs borrow directly from their main relationship bank, down from 38.6% last year. In comparison, non-bank lending demand has risen from 13.6% of SMEs to 16.4%.
Going hand-in-hand with this is the preference among SMEs for unsecured credit, where there is no requirement to put the family home up as security. One of the major attractions of non-bank lenders, be they debtor financiers, asset based lenders or marketplace lenders, is they generally do not insist on real estate security. Nearly seven in 10 SMEs are willing to pay a higher rate of interest to obtain finance if it means they don’t have to provide real estate security.
