ThinCats, a UK-based lending platform, had published a blog post earlier this month asking whether historically low insolvency rates are “disguising the real financial health of mid-sized businesses.”
The ThinCats team has carefully examined insolvency rates across over 400,000 mid-sized SMEs as part of their process of assessing the impact of the Coronavirus crisis in UK companies.
They found that insolvency rates for mid-sized SMEs last year were at “historically low levels” indicating that UK government support programs to protect firms from the impacts of the COVID-19 crisis have been successful.
ThinCats reveals that “at 0.61%, insolvency rates in 2020 were less than a third of the 1.86% peak set in 2009 during the global financial crisis.”
The ThinCats team asks:
“The real question, though, is where will insolvency rates go from here? Sectors reliant on footfall are already showing signs of stress even before the benefits of the furlough, VAT deferrals and other cost saving support schemes start to unwind and businesses that have borrowed through CBILS or BBLS start making interest repayments.”
ThinCats has also prepared a report, titled “An analysis of UK mid-sized SMEs : Where next for insolvency rates?” It looks at which UK sectors are “more resilient than others and the early warning signs we will be looking out for to gauge the speed and scale of any future rises in insolvency rates.”
Earlier this month, ThinCats revealed that the value of their outstanding loan book had exceeded £500 million “for the first time.”
ThinCats also noted that capital currently deployed by them to support UK SMEs stood at £508 million (as of early May 2021), up significantly from £306 million last year, £186 million in 2019 and £49 million in 2018.
Amany Attia, CEO at ThinCats, stated:
“Non-bank lenders have made significant progress in recent years in providing funding to smaller businesses through online platforms and to larger businesses through direct lending funds run by large private debt asset managers. Medium sized SMEs have been less well served and ThinCats has been proactively filling this gap. As well as meeting a clear funding requirement, ThinCats has attracted a wide range of institutional investment, which alongside our own equity capital, has enabled us to deploy almost £700 million of funding to support UK businesses since 2017.”
“Over the last three years our outstanding loan book has increased more than tenfold from £49m in April 2018 to £508m in April 2021. This means that more than £0.5 billion is currently hard at work supporting mid-sized businesses across the UK. Whilst it is nice to have achieved the £500 million milestone, we have well-developed plans that will enable us to deploy many times this amount over the next few years in support of businesses that will drive much of the UK’s future economic growth.”