Our Small Business Finance Markets 2021/22 report provides a timely and comprehensive review of finance markets for smaller businesses.
This year the report focuses on the role of finance in sustainable growth in addition to the detailed analysis of market developments and individual finance markets that we provide each year.
There are five key findings in the 2021/22 edition:
- 2021 was a year of contrast between debt and equity smaller business finance markets. Bank lending returned to pre-pandemic levels while equity investment in smaller businesses reached record highs.
- Output and investment growth in 2022 should create demand for finance but notes of caution remain, particularly in sectors most hit by Covid-19. Both economic uncertainty and smaller businesses’ debt positions will influence finance flows in 2022.
- In the longer-term, finance can unlock sustainable growth, but female-led and Ethnic Minority-led businesses are missing out. Evidence shows that potential finance users are being discouraged from applying and, in the case of Ethnic Minority-led businesses, facing higher rejection rates if they do apply.
- Businesses operating in places with thinner finance markets miss out too. London continues to dominate important forms of growth finance with 70% of equity investment in 2021 Q1 – Q3 going to firms in the capital.
- Breaking down barriers to smaller business finance and accelerating finance use are vital to achieving net zero. External finance can help both eco-innovators and eco-adopters contribute toward the UK’s net zero target.
The British Business Bank 2021 Business Finance survey
The Bank’s SME Finance Survey was undertaken by Ipsos MORI and engaged 2,804 small and medium businesses (ie enterprises with fewer than 250 employees) in Q4 2021. The survey covers core topics alongside a number of new questions to establish SME awareness of and demand for external finance, perceptions of raising finance and its future use in the business, barriers to growth, and historic trends and forecasts for growth in 2022. Survey data was weighted to reflect UK SMEs from BEIS business population estimates.