BBB: Challenger bank lending surpasses legacy banks
Challenger and specialist banks loaned more than legacy banks in 2022, new data from the British Business Bank (BBB) has found.
The BBB’s Small Business Finance Markets report revealed that more than £35.5bn of bank lending came from challenger and specialist banks last year, giving them a 55 per cent share of the bank lending market.
Gross bank lending to smaller businesses in 2022 was £65.1bn, a 12.8 per cent increase from 2021.
The BBB also found that there was a significant drop in the proportion of smaller businesses using external finance, with just 33 per cent seeking bank loans last year, versus 44 per cent in 2021. However, gross bank lending still ended the year on a high due to larger average loan sizes.
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The report found that the smaller business asset finance market also reached a record level in 2022 with an increase in new business of 11 per cent in 2022 to £22.1bn. The BBB said that this rise was driven in part by some easing of supply chain shortages and by rising asset prices.
“Today’s report finds strong growth from challenger and specialist banks, as well as asset finance provision, as businesses seek alternative finance options,” said Louis Taylor, chief executive of the BBB.
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“Smaller businesses are clearly adapting to a challenging economic climate, with many reducing their use of external finance. At the BBB, we are committed to supporting these businesses as they seek to achieve sustainable growth, and in turn boost economic productivity, by improving their access to external finance.”
The report also learned that net zero deal numbers outperformed the wider equity market last year. These deals made up 12 per cent of all smaller business equity deals in 2022, compared to only five per cent in 2018.
The BBB used the report to reinforce the importance of innovation in order to scale up UK productivity rates and encourage economic growth.
The bank noted that innovative businesses are more likely to use some form of external finance. Smaller businesses seeking finance to innovate are also reported to be using a wide range of finance products, with many smaller businesses opting for grant finance, asset finance or bank overdrafts to help them develop and adopt innovative products and processes.
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