Has covid-19 changed the lending landscape for SMEs?

Prior to covid-19, many SMEs were reluctant to take on debt and those that did tended to have a negative experience on lending processes, according to research carried out by Deloitte. SMEs often struggled to access the finance they needed to grow, with barriers such as lack of awareness and reluctance to give up control having an impact.

What impact has covid-19 had on SME lending?

There is no doubt that the coronavirus pandemic has had a fundamental impact on lending. The government schemes put in place have seen huge demand to date.

As at 19 July 2020, there had been 55,674 CBILS applications, 1,084,153 Bounce Back loan applications, and 465 applications to the Future Fund. £12.20bn funded through CBILS, £32.80bn through BBLS, and £0.47bn through Future fund.

What is interesting is that, according to research from Deloitte, 24% of SMEs are using these government schemes to pay off or reduce existing debt and 86% of businesses said that they expected to spend less than 50% within 12 months of receiving the loan.

Data connectivity and SME lending

The increased demand for lending, and the speed at which lending is required, is driving the adoption of digital data solutions and lenders have had to accelerate digitalization. This is a trend that is likely to continue and SMEs will need to ensure that they have the systems and processes in place to harness the benefits of digitalization.

What covid-19 has done is highlight the importance of SMEs having up-to-date (ideally real-time) data. Historically, data from SMEs has been siloed and difficult to access. With the acceleration of digitalization by lenders, small and medium-sized businesses will need to work towards accounting integration to facilitate automated digital collection.

Benefits of accounting integration for SMEs

Integrating and digitising your accounting procedures has a number of benefits for your business

1. You have a clear overview of your business’ financial position in real-time

2. Multiple users can access your data making collaboration easier

3. Data is updated automatically, giving you more time to focus on what you do best

4. Automated systems speed up lending decisions

5. Upfront business costs can be reduced

Martin Collins, MD of our associate company, White Label Resources, says “A key strategic output for business owners now comes by the utilisation of the systems and integration of accounting functions.

Integration also provides the management team with up to date real-time data with which they can make far more informed and strategic decision in the running of the business. If you are only looking in the rear-view mirror, and the information you are looking at is in the past, how useful is it really in the long run?”

If you would like any further information or assistance with accounting integration, please get in touch.

Published 30 June 2020

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