Overdraft lending to small and medium-sized enterprises (SMEs) has fallen by 37% in five years, according to Funding Options.
The peer to peer funder stated that the value of overdrafts to SMEs fell to £12bn (€14.1bn) over the past five years, as those for large businesses rose 25% over the same period.
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According to the findings, overdraft lending to large businesses is now twice the value of that to SMEs, at £24bn.
Funding Options said that the shift towards large businesses is due to changes in bank capital requirements.
They said that this lowers the amount of capital available to SMEs, reducing their abilities to meet short-term cash requirements.
According to Funding Options, alternative finance is on the rise, helped by the UK government’s ‘Bank Referral Scheme’.
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By GlobalDataConrad Ford, chief executive officer of Funding Options, said: “As banks concentrate on providing overdrafts to large businesses, SMEs have had to look elsewhere to support their short-term funding needs.
“SMEs with irregular cash flows rely heavily on overdrafts…The referral scheme will leverage the UK’s positon as a global leader in FinTech to make sure that SMEs are better able to use the diverse range of funding options available to them.”
