Letters: Small businesses will hurt first
[Re: Banks across the UK are ‘pulling the drawbridge’ as lending to small businesses hits all-time low, May 16]
The fact that successful applications for finance amongst small firms have plunged to their lowest level since records began – while lending to large corporates has increased significantly since the start of the year – highlights the disparity between the ability of large and small businesses to weather the inflationary storm.
Banks are clearly nervous about lending to SMEs in the current climate. Against the backdrop of an increasingly hostile trading environment, financial institutions are more stringent than ever in rejecting applications to finance that do not meet their strict criteria. Even when banks do provide the cash, businesses often end up paying a heavy price when it comes to interest rates and repayment terms.
This is a huge macro-inefficiency and prevents working capital from reaching all corners of the supply chain. SMEs are left without the cash they need to adapt to rising costs, causing production to slow down.
We need new and innovative approaches to business financing. Moving away from traditional lending processes, and instead supporting companies to leverage technology as a means of streamlining access to cash, must be central to this transition.
The UK has a world-leading fintech industry. Utilising it to tackle long-term pain points such as difficulty accessing finance will be key in helping the business community adapt to inflationary pressures and grow.
Paul Christensen