The lending market has altered significantly over the past 12 months – as we begin 2022 it is crucial to understand that we are in a very different place to January 2021.

In this article we look at the funding trends that dominated 2020 and early 2021 and assess the best options for businesses looking to grow in 2022 as the government scales down its support. Many businesses will now need to look beyond government-backed loans and find other options for funding.

We also highlight what lenders are looking for from businesses seeking funding, and how those businesses can give themselves the best chance of finding the most appropriate finance.


In the last three quarters of 2020 and the first half of 2021 the lending market was dominated by government backed loan programmes.

CBILS and BBLS lending made up the majority of small and medium business lending between April 2020 and May 2021, representing 61% of total lending to SMEs in this period (from analysis of Bank of England and British Business Bank data).

Following the end of the CBILS and BBLS schemes, certain businesses looked to the Recovery Loan Scheme (“RLS”), which launched in April 2021, for further financial support. The RLS is now due to end in June 2022 and changes to the scheme as of January 1st 2022 have made it less suitable for many businesses.

Firstly, the government’s guarantee to lenders has dropped from 80% to 70%. With the government underwriting less of the debt, the risk that lenders are exposed to is increasing, which may make certain loans less attractive to write.

The maximum size of loan available to a single business through the RLS has also been reduced from £10m to £2m, making them less of an option for larger SMEs.

What next for businesses looking to grow?

With the winding down of the government-backed lending schemes, businesses looking to finance growth and acquisition will have to consider other sources of funding.

While bank lending may be the right solution for some businesses, others may be best seeking finance from debt funds or other alternative lenders.

Lenders are especially keen to finance businesses that have a strong asset base. Businesses that own real estate, plant and machinery or have a large inventory base that the lender can take security over will be attractive as the assets provide downside protection for the lender.

Additionally lenders are also keen to fund businesses where they can see consistent recurring or contractual revenue, as those businesses have higher levels of certainty over the future cashflows that they will generate, and which will be available to service new debt.

Those businesses who have shown resilience through the Covid period will also be looked on favourably by lenders, especially given the impact of Omicron and the potential return of Covid restrictions.

Probably more so than ever, companies with strong management teams and those that can distinguish themselves from competitors in the sector through a unique offering, or technological innovation will be more attractive to lenders.

Providers of non-government backed funding are currently very busy, with activity levels having rebounded following a period of reduced demand for their funding due to availability of CBILS/BBLS between March 2020 and May 2021.

Businesses will thus need to ensure they have the necessary tools to get the right finance in place in a timely fashion.

The keys to obtaining the correct funding include:

  • Starting the funding process early – to ensure that a business has appropriate time to prepare the correct information and find the right funder

  • Prepare a funding memorandum that clearly articulates the funding request and provides the information they will require to prepare a credit paper – this includes an overview of the business, an overview of the management team, and the key potential risks to the business and the ‘mitigants’ (the key factors that offer downside protection to the lender if those events occurred)

  • A funding proposal should also include information on business strategy and financials, including both historical and robust, supportable future forecasts, and a review of the key financial metrics and the proposed repayment of the new loan

  • Funders will invest more time in considering a business when they feel there is a clear and focused plan and when the proposal is tailored specifically to the lender being approached. Conversely, funders will give less consideration to plans they feel are too generic or light on detail or where the funding ask is unclear

  • If a finance provider thinks a business is contacting dozens of other funders with the same proposition, they may be less inclined to assess it with full consideration (as their time is more precious than ever) than if a focussed process is run with the most likely lenders approached

Advisers such as ACP Altenburg Advisory can help businesses ensure they are speaking to the right lenders with the correct information and the right ask. We are able to leverage our relationships with lenders to support businesses and maximise our clients’ chances of getting the most appropriate funding in the most time-efficient manner.

ACP Altenburg Advisory is part of ACP, a leading independent debt advisory association for SME and mid-market companies, advising clients on the options available to them and providing hands on support from day one all the way through to drawdown.

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