ThinCats has said that small- and medium-sized enterprise (SME) lending volumes declined during 2020, despite the introduction of the coronavirus business interruption loan scheme (CBILS).
The alternative lender, which was accredited to CBILS in April last year, said its analysis of mid-sized businesses borrowing more than £1m suggests that there were approximately 10,000 borrowers during 2020 compared to 20,000 in a typical year.
Of these 10,000 borrowers, ThinCats estimated that 5,000 borrowed under CBILS.
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“So, unlike smaller businesses which rushed to take advantage of “free money” through the bounce back loan schee, we believe there was less overall lending to mid-sized businesses during 2020 despite the attractions of CBILS,” ThinCats said in a blog on its website.
“Reasons for this may be that mid-sized businesses had better existing liquidity levels to deal with the initial shocks brought by the pandemic and wanted to assess the business landscape before committing to any new funding.
“Alternatively, some may have required funding that did not qualify for CBILS but struggled to secure finance for this given the industry’s focus on the government-backed loan schemes.”
ThinCats said its recent conversations with corporate finance advisers suggested that there is significant pent-up demand to fund transactions such as management buyouts which did not qualify for CBILS.
The lender said that four of the big five high street banks gave evidence to a Treasury committee in December that suggested the bounce back loan scheme (BBLS) saw a huge rise in smaller businesses taking external finance for the first time.
These banks said that most of the CBILS funding was from businesses that had borrowed previously and would have sought finance outside of the scheme if it was not available, ThinCats said.
ThinCats said the banks estimated that approximately 50 per cent of BBLS funds had been deployed, whereas for CBILS, a much higher proportion had already been used.
The lender said that banks also highlighted that they had seen lower insolvency levels than in normal years due to the government support schemes.
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“However, this raises a question about whether this will lead to a ramp in insolvencies further down the line as businesses that would normally have gone under were able to continue,” ThinCats said in the blog.