UK-based SME funding advisors are reporting significantly lower levels of activity and fewer business pipelines when compared to earlier this year. This, according to a survey conducted by the team at ThinCats.
The firm reported that over 55% of advisor surveys reveal that there are considerably lower levels compared to just 6 months back, meanwhile, around 25% said there were higher levels and just 18% claimed there’s no significant change in activity.
As noted by ThinCats, macro issues are the most frequently cited problem for considerably lower levels of funding demand (about 52%). This is followed by interest rate increases (36%) as well as valuation expectations (at roughly 32%).
The lowered overall demand for debt funding has been seen during a time of continued increases in interest rates as well as major levels of inflation in the United Kingdom.
About a third or 33% of advisors stated that overall funding from banking institutions is declining when compared to just 6 months prior, however, only 28% stated that there had actually been less funding provided via non-bank lenders.
Ravi Anand, MD at ThinCats, stated that it is no surprise that finance advisors are witnessing lowered demand for debt funding because of the macroeconomic issues.
He added that even though there are high interest rates, a number of firms still identify opportunities to tap into various income channels which aim to make up for the higher costs of borrowing funds.
He also mentioned that further encouragement may be drawn from data suggesting that inflation rates are declining. This might suggest that we’re nearing the peak of the present interest rate hike pattern.
He furhter noted that SMEs which have been postponing their
ongoing business expansion strategy could be more confident regarding seeking M&A transactions, particularly if pre-retirement entrepreneurs begin to exit ahead of the upcoming general election.
The ThinCats survey reportedly obtained feedback from around 50 UK-based corporate finance, debt advisory, accountancy as well as private equity companies.