The latest Small Business Finance Markets report, prepared by the British Business Bank, shows that the UK market for Small and Medium sized Enterprise (SME) finance has improved markedly during the last 12 months.

The latest Small Business Finance Markets report, prepared by the British Business Bank, shows that the UK market for Small and Medium sized Enterprise (SME) finance has improved markedly during the last 12 months.

Around 350,000 new companies were registered during 2015 – bringing the total UK SME population to around 5.4 million companies. The report, published earlier this year, concluded that liquidity is indeed returning to SME debt markets and that the availability of credit for small businesses is improving.

Equity investment in smaller businesses grew by over 40% during the year to October 2015, and the prosaically titled Alternative Finance sector saw lending to SME businesses increased by some 75%, to £1.26b, during the 2015 calendar year.

Lending to SMEs by the big highstreets banks – historically the main form of finance for smaller businesses – is also continuing to improve, despite ongoing negative publicity. After a number of years of contraction, the 2014/15 tax year saw – for the first time in a long time – 12 months of consecutive positive net lending by the high street banks to SME businesses.

With more than half of all SME businesses seeking to increase their top line in the next twelve months, it is vital that suitable finance becomes available to support these growth ambitions; and even despite a marked increase in the availability of credit, access to growth finance remains ever elusive for a great many UK SMEs businesses. Indeed, as Economia pointed out recently, OECD data shows that the UK is towards the bottom of the table for the percentage of new businesses which reach 10 employees (though as a measure of business growth success, this is arguably a very arbitrary measure).

In terms of how that provision of debt is made up; in 2014 around £4 for every £5 lent to SME businesses is financed by the largest four highstreet banks; Barclays, Lloyds, RBS/NatWest and HSBC. Many SME businesses do not even consider looking at Alternative Finance providers.

On the equity side, £3 of every £4 invested into SME equity takes place in London or South East-based companies. Yet a separate report released in February 2016 revealed that SME investment appetite in the UK has reached levels not seen since 2011.

The research, conducted by Lyceum Capital and Cass Business School, showed that the volume of transactions rose by over 10% during 2015 – to 87 investments. Deal volumes remain however 30-40% lower than their pre-2008 (i.e. pre financial crisis) levels.