New lending to SMEs remains stable in first half of 2022

UK Finance today releases its latest Business Finance Review which reports the finance needs of small and medium-sized enterprises (SMEs).

Our latest Review shows that gross lending to SMEs edged up higher to £5.1 billion in the second quarter of 2022, with demand for overdraft facilities remaining stable following a rise in the previous three months.  

The quarter also saw a continued rise in advances through invoice finance and asset-based lending (IF/ABL), with total lending now broadly back to pre-pandemic levels.  

Stephen Pegge, Managing Director of Commercial Finance, said:  

New lending to SMEs remained stable in the first half of this year but looking ahead there are signs of a slight reduction in demand for finance. Increased costs, including rising energy prices, means businesses have been cautious about committing to longer-term investments. However, these concerns should be helped by the energy price guarantee that will apply to businesses.  

“In the meantime, the availability of finance remains consistent and repayments continue steadily to reduce total outstanding borrowings from their peaks last year. SMEs appear to be focused on managing cashflow challenges, with overdraft demand stable and invoice finance advances rising significantly over the past year as more clients are starting to use this form of finance again.   

“As has been the case over the past year, there remains a high degree of financial headroom across SMEs, and lenders continue to stand ready to support businesses.  

Gross lending 

Gross lending to SMEs rose slightly in the second quarter of 2022 to £5.1 billion. This was the highest quarterly value of lending since the same time a year ago, but nevertheless continues a largely stable trend in lending since the end of the government-backed loans that were in operation during the pandemic. 

Gross lending to SMEs through loans and overdrafts   

Gross lending to SMEs through loans and overdrafts



Following a rise in overdraft applications and approvals in the first quarter of 2022, demand for new facilities held firm in the second quarter. Overdraft utilisation also increased for the second quarter running. 


Number of approved loans and overdrafts by sector Number of approved loans and overdrafts by sector



The level of SME deposits was stable in the quarter and lower than the same time a year ago. The value of total deposits has dropped by 1.5 per cent year-on-year, although a larger fall was seen in the value of time deposits, which are down five per cent. However, the total continues to represent a significantly larger cash cushion than was available prior to the pandemic. 


SME Deposits 

SME Deposits



The value of repayments by SMEs has been stable at around £8.4 billion for the past three quarters, including in the most recent period, as businesses continue to meet their government lending scheme repayment obligations. Repayment trends across small- and medium-size businesses continue to move in tandem with a corresponding reduction in loan stocks from the peak last year. 


Value of repaymentsValue of repayments


Invoice finance and asset based lending (IF/ABL) 

IF/ABL advances rose on the quarter and year-on-year with annual growth particularly strong amongst larger businesses with a turnover of over £10 million. There are some sector differences evident in the past year, with growth in advances strongest in retail.  

The growth in the total sales of clients supported by invoice finance and asset-based lending has been notable, as UK Finance members supported clients with a turnover of £75.3 billion during the first quarter of 2022, the second highest quarterly level ever. This is up over 11 per cent on the first quarter in 2021. 


Value of invoice finance and asset-based lending advances  Value of invoice Finance and Asset-based lending advances

Note: IF/ABL data includes advances to client businesses of all sizes