The landscape of financial services for Small and Medium-sized Enterprises (SMEs) in the UK has been undergoing significant changes in recent years.

A key trend has been the rise of short-term lenders, which have been stepping in to fill the gap left by traditional banks.

This article explores this phenomenon, its causes, and its implications for the future of SME financing in the UK.

The Current Landscape

In the first half of 2022, gross lending to SMEs in the UK increased to £5.1 billion, with a notable rise in advances through invoice finance and asset-based lending (IF/ABL).

This trend indicates a return to pre-pandemic levels of lending.

However, there are signs of a slight reduction in demand for finance due to increased costs, including rising energy prices.

In 2020, the UK government introduced schemes to support smaller businesses in response to the COVID-19 outbreak.

This led to a surge in bank lending to SMEs, with gross flows of bank lending (excluding overdrafts) rising by more than 80% to GBP 103.8 billion.

However, the usage of most other types of finance, including invoice finance and asset finance, fell sharply.

The Emergence of Short-Term Lenders

As traditional banks have become more cautious in their lending, alternative lenders have stepped in to fill the gap.

These lenders, often fintech companies, offer a range of short-term financing options to SMEs.

These include invoice financing, merchant cash advances, and short-term loans.

These lenders often use technology to streamline the application process and make quick decisions, making them an attractive option for SMEs in need of quick access to capital.

The Implications

The rise of short-term lenders has important implications for SMEs and the wider economy.

On the one hand, it provides SMEs with more options for financing and can help them overcome temporary cash flow problems.

On the other hand, it also raises concerns about the cost of borrowing and the potential for over-indebtedness.

As this trend continues, it will be important for regulators to ensure that these new forms of lending are conducted responsibly and that SMEs are adequately protected.

In conclusion, the rise of short-term lenders for UK SMEs is a significant development in the financial services landscape.

It reflects both the challenges faced by SMEs in accessing traditional forms of finance and the opportunities presented by technological innovation in the financial sector.

As this trend continues, it will be important to monitor its impact on SMEs and the wider economy.

If you’re a small or medium-sized business looking for funding, then why not contact The Funding Store today.

We do not charge broker fees, and with access to one of the most extensive and competitive lending panels in the UK, can bring you fast, flexible solutions that meet your finance needs.

The Funding Store can help guide you through the funding process and find the best funding options that fit your specific needs.

Whether you’re looking to start a new business, expand an existing one, or cover unexpected expenses, The Funding Store can help you achieve your financial goals.

So don’t hesitate, contact us today on 01908 880420, to take the first step towards securing the funding you need to grow and succeed.

Share This Story, Choose Your Platform!

This article has been produced by for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of the information contained in this article is accepted by The Funding Store Ltd. In all cases appropriate professional legal and financial advice should be sought before making a decision.