Our impact report – the trends among SMEs and how we’re providing support

SMEs faced a number of new challenges in 2022

In 2022, the resilience of SMEs continued to be tested. The majority of SMEs surveyed by Funding Circle feel the experience of the pandemic has made their business stronger, putting them in good stead to deal with rising inflation and interest rates. Increasing costs quickly replaced the pandemic as their primary concern, particularly among micro and small businesses, with 40% reporting this as a major barrier.

Turnover is improving, but it’s a gradual process 

The number of SMEs reporting reductions in revenue (relative to normal expectations) has fallen from the heights of the pandemic, but has remained at around one in four, according to the ONS BICS survey. Research by Hokodo supports this, with 48% of surveyed SMEs saying they are earning more revenue, whilst 28% still struggle to break even. 

Cash reserves across the general SME population remain elevated

Much of the funding built up during the pandemic remains in place – with around one third of SMEs holding £10,000 or more in credit balances towards the end of 2022. 

Collectively, 40% of SME turnover was held on balance sheets during the same period, compared with 24% pre-pandemic. Further evidence from the ONS BICS reveals the percentage of SMEs with more than six months of cash reserves increased to 42% by 

the end of 2022.

With the uncertainty in the economy short-term, many still plan to grow 

Whilst below the peak of 2021, the number of SMEs with plans to grow their business remained largely flat throughout 2022. 

Research by the FSB revealed that two-thirds of SMEs were planning to make some 

form of investment in their business by 2024. While the backdrop remains challenging, if conditions continue to ease and interest rates peak as expected, then SMEs can move forward with renewed optimism beyond 2023.

Funding Circle’s impact and how it helped businesses thrive 

Last year, outstanding lending through our platform helped to contribute £6.9bn to UK GDP, generate £1.4bn in UK tax revenue, and support almost 106,000 jobs around the UK. We’re really proud of these contributions, which have helped thousands of small businesses to invest and grow, as well as support and create opportunities in their local communities.

Supporting SMEs in every corner of the UK

Loans through Funding Circle’s platform reached businesses located in all of the UK’s 650 parliamentary constituencies, with an average of £1.6 million in loans per constituency. 

We also found our loans are more likely to help businesses in areas of the UK that are experiencing socioeconomic challenges. In 2022, businesses located in the top 10% of local authority districts with the: 

• Highest unemployment rate – received 13% of Funding Circle’s lending
• Lowest rankings in the English Index of Multiple Deprivation – received 12% of Funding Circle’s lending
• And highest rates of economic inactivity – received 12% of Funding Circle’s lending.

Using technology to provide finance quickly and easily

With innovative technology a focus of ours, it’s also exciting to see that SMEs still value the speed and ease that they can get a loan with us. Some 32% of surveyed customers said it was the simplicity of the application that attracted them, whilst 31% cited the fast process.

Finance remains crucial – both for SMEs planning to invest for their future and those looking for short-term solutions – so if you or a client needs finance to go further this year, we’re here to help. 

If you’d like to read the full report you can check it out here.