Challenger and specialist lenders overtake banks for SME finance
High street banks have been replaced by challenger and specialist lenders when it comes to funding for UK SMEs in deals done by brokers, according to a new report.
Data suggests brokers have a critical role in diversifying SME funding access, with 33 per cent of deals facilitated by specialist lenders and 28 per cent by challenger banks, in a survey by the National Association of Commercial Finance Brokers (NACFB).
The trend is almost exactly mirrored by the British Business Bank’s latest findings, which show challenger and specialist banks now account for 60 per cent of UK gross commercial lending, eclipsing the big five high street banks for the fourth consecutive year.
Brokers are also tapping into an even wider ecosystem of lenders, from burgeoning fintechs (two per cent) to community development finance institutions (0.5 per cent).
A fifth (20 per cent) of SMEs secured funding through NACFB brokers after initial rejections.
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NACFB members facilitated nearly three quarters (£26.5bn) of the UK’s £38bn broker-led SME lending market, according to the report.
Lenders attributed 67 per cent of their SME portfolios to intermediaries on average.
“The future belongs to relationship-led lending,” said Jim Higginbotham, chief executive of the NACFB.
“With 220 new clients per member and £38bn in intermediary-led lending last year, brokers should not just be seen as intermediaries, they’re growth partners.
“Their ability to match SMEs with the right solutions is why two-thirds of commercial lender portfolios flow through brokers.”
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Loyalty remains central, with nearly half (48 per cent) of all brokers’ leads last year coming from returning clients.
Broker flexibility was also a strong trend, with a quarter of SME clients receiving an alternative form of financial product to their initial requests, whilst 33 per cent of brokers expanded their service offering in 2024 to meet demand.
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