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Challenger banks surpass high street lenders for SME loans

Challenger bank lending
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Challenger and specialist banks have surpassed high street banks for smaller business lending, with new data showing they accounted for 55% of the SME market in 2022.

According to the state-owned British Business Bank, challenger and specialist banks provided a record £35.5bn compared to the £29.6bn deployed by traditional UK banks.

“Today’s report finds strong growth from challenger and specialist banks, as well as asset finance provision, as businesses seek alternative finance options,” said Louis Taylor, CEO of British Business Bank.

Last year smaller businesses relied less on outside finance, with usage shrinking by 11%, the report found. However, larger average loans pushed gross lending up by 12.8%.

Challenging funding enviornment

The challenger bank lending findings come amid a difficult funding environment for startups and SMEs. In the third quarter of 2022, just 33% of smaller businesses were using external finance compared to 44% the year prior....