Small and medium sized-businesses within the real estate sector are struggling to attain finance. While SMEs, in general, are scrambling to gather enough cash for expansion, real estate seems to be having the most trouble. According to new research conducted by commercial lender Ortus Secured Finance, lending to SMEs in the real estate sector fell quicker than almost any other sector, with the general figure for SME lending falling by a mere two percent from £58.2bn in 2016-17 to £57bn in 2017-18.
Ortus further revealed that the real estate slowdown has contributed to the current housing crisis, where not enough houses are being built or meeting demand. Without easy access to finance, businesses are struggling to afford new equipment or build a larger workforce, thereby failing to improve the output of its workers.
While high street lending has historically been the easiest and most efficient route to finance; times are changing. Now there are multitudes of alternative finance platforms, from crowdfunding to peer-to-peer lending. These new providers have provided consumers with choice in how best to grow their business. None of these platforms are perfect, however, and business owners need expert advice on which is best. Bank lending was arguing the most damaging, riddling business owners with interest rate debt, while crowdfunding demands a portion of the business and others still involve borrowing and therefore involve repaying.
At the Credit Protection Association, we are both a credit management and debt recovery company, both strengthening and protecting our members’ financial position. We care less about throwing money at the problem, and more about advising our members on how to sustain their new financial power.
Jon Salisbury, managing director at Ortus Secured Finance, said: “The fall in lending to SMEs in the property sector is indicative of the wider lack of financing available to smaller businesses from the high-street lenders across all industries as the economy rebalances.”
However, the Ortus data showed that there were three sectors where SMEs saw in increase in bank lending in the last year, including manufacturing which saw the greatest rise of 11 per cent to £6.3bn in the last year.
“Although a few key sectors, such as manufacturing, saw increased bank lending, more needs to be done to make sure financing support reaches businesses across all parts of the economy,” said Salisbury.
“Access to finance is crucial for smaller businesses to make the investments need to take their operations to the next stage, but without it many can see their growth stall and operations limited in scope.”