Bank lending to small retailers falls 4% in just a year

11 February 2019

  • Lack of bank lending pushing retailers out of business
  • Small businesses increasingly turning to alternative finance options

UK bank lending to small and medium sized retail businesses has fallen by 4% in the last year, to £14.9 billion, from £15.6 billion the year before (1), shows new research from Funding Options, the online business finance supermarket.

Funding Options explains that while banks are not cutting off lending to the sector overall, the funding of smaller retailers has reduced as banks become more concerned over retailers’ abilities to deal with the challenges facing the sector.

High streets are becoming gradually hollowed out as more big retailers shift their focus to growing their online sales. Smaller retailers need additional funding to enhance their websites and improve their high street offering in order to compete.

More of these smaller retailers risk going out of businesses as traditional forms of lending become harder and harder to access. In addition, smaller retailers are finding it tougher to get credit from their own suppliers, which creates extra pressure on cashflow.

Insolvency Service data shows that insolvencies in the retail sector jumped by 13% in the year to September 30 2018. Patisserie Valerie recently went into administration after banks withdrew finance following its high-profile accountancy scandal.

Lending to small and medium-sized retailers dropped by 4% last year, compared to the 5% increase in lending to larger retailers

Funding Options explains that more small businesses are turning to alternative finance providers to combat the funding gap. A recent report showed that the use of alternative finance options by businesses, such as asset finance and peer-to-peer lending, have increased by 12% and 51% respectively in the last year (2).

Bank lending seems to be shifting away from smaller to larger retailers. Lending to large retailers has risen by 5% over the last year, to £37.7bn in November 2018 from £36bn the year before.

Conrad Ford, CEO of Funding Options (, comments: “Retailers struggling to get lending must not give up the ghost. There are other forms of finance other than bank loans.”

“Many small businesses have characteristics, such as seasonality, that can mean they have different risk profiles. Being a seasonal business can mean inconsistent income, and therefore cashflow, which can make it hard to maintain the regular loan repayments that are needed under a standard bank loan.”

“However, there are plenty of alternative financing options available beyond lending that can support a business’ growth and investment. These options are often flexible and accommodating.”

“The more retailers are aware of these options, the better.”


1) Bank of England data, latest data available, year-end November 30 2018

2) British Business Bank