Approximately £3.5bn was lent to small and medium-sized enterprises (SMEs) in the Q4 of 2023, UK Finance’s latest Business Finance Review has revealed.
This marked Q4 as the first quarter not to see a fall since Q2 of 2022.
According to the data, demand uncertainty, higher interest rates, and the impact of lending taken out during the pandemic all contributed to weakness in gross lending in 2023.
However, the decline in gross lending over the previous five quarters came to a halt in the final months of 2023.
Lending to medium-sized businesses was the first to turn a corner, as these firms saw the first rise in gross lending in two years.
In addition, approvals for new financing increased over the quarter.
The number of new loans and overdrafts rose by 3% and 7% respectively compared with Q3.
The value of new loans approved was the highest since the third quarter of 2022.
Medium-sized businesses saw a more significant increase, with the value of approved overdrafts rising by nearly a fifth and loan approval values increasing by 17%.
David Raw, managing director of commercial finance at UK Finance, said: “2023 was another challenging year for SMEs as they continued to face uncertain demand and rising borrowing costs.
“There were promising signs that demand for new finance may be turning a corner in the final quarter of 2023.
“Approvals for new loans and overdrafts increased and the rise was broad-based across all sectors. This could be a sign that confidence is gradually improving.
“Lenders are ready to support businesses across the UK who need and can afford finance.
“Those concerned about their financial position or those planning for the future are always encouraged to have early conversations with their lender.”
