ThinCats warns on SME lending softening demand
Macro issues weigh on business confidence for SMEs, prompting some pullback for borrowing.
SME funding advisers are seeing lower levels of activity and reduced business pipelines compared to six months ago, according to a ThinCats survey.
More than (56 per cent) of advisers surveys reported lower levels than six months ago, 26 per cent reported higher levels and 18 per cent reported no change.
Macro issues were the most commonly cited reasons for lower funding demand (52 per cent), followed by interest rate hikes (36 per cent) and valuation expectations (32 per cent).
The softening demand for debt funding comes amid repeated hikes in interest rates and stubborn levels of inflation high inflation in the UK.
Just under a third of advisers (64 per cent) said funding from banks is lowering compared to six months ago but just 28 per cent said there was less funding available from non-bank lenders.
Ravi Anand, Managing Director, ThinCats says it’s “no real surprise” that corporate finance advisers are reporting reduced demand for debt funding given the continuing macro challenges.
"Despite high interest rates, many businesses continue to see opportunities to deliver new income streams which more than cover the higher costs of borrowing,” he said.
“Further encouragement can be drawn from recent data indicating inflation rates are now falling, which could mean we are approaching the peak of the current interest rate hike cycle. SMEs that have been delaying their expansion plans may now feel more confident about pursuing M&A deals, especially if more pre-retirement business owners look to exit in advance of the next general election,” he added.
The survey includes responses from 50 UK corporate finance, debt advisory, accountancy and private equity firms.