Number of start-up loans dips in 2022/23

Written by: Rachel Miller

Date: 5 September 2023

A small business thrives thanks to the injection of a small business loan

Almost 10,000 start-up loans were awarded to businesses during the 2022/23 financial year; however, the number of loans has been decreasing year-on-year and the British Chamber of Commerce is calling for action to improve the availability of finance for SMEs.

A new study of the provision of government start-up loans in the UK by BusinessComparison has revealed that the British Business Bank awarded 9,536 start-up loans to businesses in the 2022/23 financial year. The value of these loans was £120 million. However, there has been a drop in the number and value of start-up loans given compared to previous years. According to information provided by the British Business Bank:

  • In 2020/21, 11,318 loans were issued, costing £137.3 million;
  • In 2021/22, 10,372 loans were issued, costing £130.7 million.

The data also shows that London was the region with the highest number of start-up loans during 2022/23, with 1,491. This was followed by the South East (1,217) and the North West (1,091). Northern Ireland was revealed as the UK region with the least amount of start-up loans in 2022/23, with 149.

"Our study into start-up loans and businesses around the UK yielded some fascinating results. In particular, it was intriguing to learn that the amount of loans being awarded from the British Business Bank has decreased since the previous financial years, with outside factors such as interest rates and inflation, it will be interesting to see how this trend develops in the future." Philip Brennan, founder and md at BusinessComparison.

So far in this financial year, 3,141 loans have been awarded, costing £40.2 million - which suggests that the number of loans could be falling further.

In July, a Treasury Committee launched an inquiry into the challenges faced by SMEs when seeking finance. The British Chambers of Commerce (BCC) has called for action to improve the availability of finance for SMEs; in its submission to the committee, it said many smaller firms are no longer seeking finance as they consider it too limited and costly. The BCC submission said:

  • Current economic conditions are some of the most difficult seen in generations - and rising interest rates have left an increasing number of firms worried about borrowing costs.
  • Many businesses feel locked into their current financial provider and are fearful of shopping around.
  • A lack of competition due to poor awareness of options outside the traditional banking route is holding back progress.
  • Unlocking alternative finance options, increasing the flexibility of funding and a comprehensive drive to increase awareness are all needed to shift the dial.

BCC calls for action on SME finance

Jonny Haseldine, BCC policy manager, said: "Research has highlighted that in 2022 almost half of smaller firms (48%) did not borrow any funds. But among those that are currently using finance, half are using more than pre-pandemic and becoming more concerned about their ability to pay. This is an especially acute issue after many firms were forced to take on much higher debt burdens during the pandemic in order to survive.

"More needs to be done to help firms find the right solutions. We also need to see the British Business Bank given more resources, greater support for social enterprise lenders, and improved flexibility in funding criteria. The system desperately needs to change. With investment in the UK economy continuing to toil in the doldrums, we must widen the pool of financial options available to firms to kick-start the growth we need."

Written by Rachel Miller.

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