Concern loans to SME market overheating

Concern loans to SME market overheating

The easy availability of credit to SMEs at low rates risks leading to another credit crisis for the sector warns a prominent business lender. 

Gavin Wraith-Carter, managing director at Hitachi Capital Business, which has a loan book close to £1bn for UK businesses, says that with the supply of loans currently outstripping demand, lenders are not only reducing their interest rates but increasing their risk appetites.

He warns if credit losses rise there could be a return to the situation in 2008-2009 when lenders withdrew from the SME market and entrepreneurs struggled to find loans. 

"There is a massive amount of supply in funding now, I do not think any SME will struggle to get funding from somewhere," he said. "What we are always concerned about is can we be here for the SMEs in good times as well as bad."

The over supply, said Wraith-Carter was being caused by the expectations of shareholders and stakeholders.

"They have seen the opportunities for profit in the SME market. They are seeing historically low risk costs, but we all know at some point that cycle turns."

He some of these lenders were ill prepared for credit risk.

"If you have got tight positions and small teams to help customers, you can do a lot of damage to the SME market and damage to UK PLC," he said.