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Peer2Peer Finance News | August 21, 2019

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Banks snubbing small retailers over concerns of health of the high street

Banks snubbing small retailers over concerns of health of the high street
Marc Shoffman

UK BANK lending to small- and medium-sized retail businesses fell by four per cent last year, due to concerns about the challenges facing the sector.

Research by alternative finance aggregator Funding Options found smaller retailers borrowed £14.9bn from banks in the year to November 2018, down from £15.6bn over the same period in 2017.

In contrast, bank lending to large retailers rose by five per cent over the same period to £37.7bn.

It comes amid a string of high-profile casualties on the high street such as House of Fraser and Patisserie Valerie, that recently went into administration.

Many of these are larger firms but Funding Options warns that smaller retailers may also be struggling as they need additional funding to enhance their websites and improve their high street offering in order to compete.

In addition, smaller retailers are finding it tougher to get credit from their own suppliers, which creates extra pressure on cashflow.

Read more: Funding Options launches in the Netherlands

Funding Options has found that more small businesses are turning to alternative finance providers to address the funding gap. A recent report from the British Business Bank showed that the use of alternative finance options by businesses, such as asset finance and peer-to-peer lending, have increased by 12 per cent and 51 per cent respectively in the last year.

Read more: Funding Options appoints chief product officer to boost digital presence

“Retailers struggling to get lending must not give up the ghost,” Conrad Ford, chief executive of Funding Options, said.

“Many small businesses have characteristics, such as seasonality, that can mean they have different risk profiles.

“Being a seasonal business can mean inconsistent income, and therefore cashflow, which can make it hard to maintain the regular loan repayments that are needed under a standard bank loan.

“However, there are plenty of alternative financing options available beyond lending that can support a business’ growth and investment. These options are often flexible and accommodating.

“The more retailers are aware of these options, the better.”

Read more: SMEs accessing loans ‘within hours’ through Bank Referral Scheme