Average debt burden of businesses seeking finance double pre-pandemic levels

In its latest quarterly lending monitor, the firm reported that while the average debt-to-turnover ratio of small companies seeking loans “appears to have settled”, it remains at a level that undermines many businesses’ chances of securing finance.

Access to finance also remains “stubbornly below” pre-2020 levels, with the company noting a rise in applications that are “no longer primarily about fuelling growth – but survival”.

Funding Xchange said the shift in the profile of prospective borrowers – towards companies less likely to be accepted for funding – has been driven by the tens of billions of pounds in additional debt taken on during the pandemic.

It added that the UK government’s support was the most generous in Europe, with around one in three British companies having taken out an emergency loan.

While borrower readiness and affordability were described as the “real barriers to borrowing”, the firm said businesses now appeared to require stronger financial health than at any time in the past decade.

Funding Xchange chief executive Katrin Herrling commented: “Based on our experience, the impact of the negative experience can be long-lasting. Businesses believe ‘they are not good enough’ and will forgo applying for finance in the future.”