Gross lending to small- and medium-sized enterprises (SMEs) in the first quarter of 2021 was £7.6bn, down from £9.6bn in the fourth quarter of 2020.
However, overall the latest lending figures from UK Finance painted a picture of a business community on the mend, as demand for business finance tapered off ahead of the reopening of the economy.
While SME financing was down quarter-on-quarter, volumes were still higher than they were before the pandemic.
SME confidence was up, and a massive 87 per cent of business loan applications were approved during the first three months of the year.
“In the first quarter of 2021, the lending environment was broadly stable,” said Stephen Pegge, managing director of commercial finance at UK Finance.
“Gross lending was elevated compared with pre-pandemic levels, but had tapered back from the peak seen last summer.
“Ahead of the economy reopening businesses were continuing to meet their finance needs with a combination of ‘business as usual’ lending and that still on offer through government-backed schemes.”
UK Finance also noted that there have been signs of some increase in loan repayments, particularly amongst smaller business and faster growing sectors.
“While the economic picture is looking more positive, we expect a multispeed recovery across different segments of the economy,” Pegge added.
“This will drive differences in future demand for additional finance, debt repayments and growth plans across businesses.”
John Cronin, an analyst at Goodbody, said that overall the data is “a little backward-looking at this stage, the ongoing return to more ‘normal’ funding conditions is consistent with the themes captured in other data and commentaries.”