The Bank of England released Funding for Lending Scheme numbers for Q2 2015 in early September. Those numbers portrayed a somewhat mixed, but overridingly positive message for the nation’s SMEs. Net Lending by FLS participants to SMEs climbed by £490m in Q2, compared to £0.6bn in the previous quarter. Whilst the Q2 numbers fall a little shy of those produced in Q1, they nonetheless vastly exceed 2014 FLS lending volumes, which on average fell by £0.5bn per quarter.
The Bank of England has indicated that the continued improvement in net FLS lending to SMEs reflects a “loosening” in credit conditions for SMEs during Q2. The Bank points to the Federation of Small Businesses’ Voice of Small Business Index – which identified an uptick in credit availability during Q2 – as evidence. Respondents to the Bank’s recent Credit Conditions Survey stated that both credit spreads and fees and commissions on lending to medium sized companies have dipped significantly in Q2, but that such numbers were largely unchanged for small business lending.
We’ve been tracking FLS lending in relation to the contributions of the alternative finance space for some time. FLS lending to SMEs fell like clockwork throughout 2014. In Q3 2014 the alternative lenders managed to do enough to close up the funding gap that had been created by a -£128m quarterly contraction in FLS SME credit. Our first positive reading for FLS lending to small businesses came in Q1 this year.
2014 saw a £1.999bn contraction in the supply of FLS credit to SMEs. Q1 2015’s FLS resurgence in part plugged that gap with £600m in lending capital, taking the net lending total (since our coverage of the FLS began in Q1 2014) to £1.399bn. Factor in also the £1.305bn that had been supplied by alternative business lenders within that same 15 month time span, and the balance stood a mere £94m away from hitting zero (N.B. that this number does not factor in the contributions of non-P2P models, such as Liberis and Fleximize). The positive £490m that was doled out by FLS participants in Q2 2015 brings the balance of the FLS (since we began tracking it) to -£909m.
So what was the contribution of the alternative finance space in Q2 2015? AltFi Data states that the UK’s alternative business lenders produced £367m of lending during Q2 this year. Add that to the £1.305bn that has been advanced to UK SMEs by the peer-to-peer sector since the start of 2014, and we have a grand total of £1.672bn. That number is more than sufficient to close up the £909m funding gap that has been created by the net fall in FLS lending to SMEs over the past 18 months. Our balance (since the start of 2014, factoring in only the shifts in FLS funding and the contributions of the alternative business lenders) therefore stands at £763m.
With FLS lenders putting together a much better year than in 2014, and the lending volumes of the alternative players growing all the while, the situation is looking ever rosier for small businesses in the UK.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.