Intelligent Issue 07 | Page 21


Demand for smaller business finance is down
The data reports a considerable drop in the demand for external finance . In Q3 2022 , only 33 % of smaller businesses were using external finance compared to 44 % the year prior . Gross lending grew despite fewer smaller businesses using finance , as they sought larger loans to support their business due to inflationary pressures . In addition , survey findings show that success rates for those seeking loans fell sharply from 80 % to 64 % year on year .
For the smaller business equity finance market specifically , investment activity has slowed considerably since Q3 2022 . Recent years have seen larger equity deal sizes and increased company valuations but in recent months investors have re-evaluated their positions leading to smaller deals and lower valuations .
Net zero deal numbers outperform the wider equity market
Data shows that equity finance markets are adapting to the growing demand for investment in green innovation , with net zero deals outperforming the wider equity market . These deals currently make up 12 % of all smaller business equity deals compared to only 5 % in 2018 , and deal values are rising even faster . The investment value of net zero-related deals rose by 184 % over the past year – soaring to a new record level of £ 1.7 billion .
The majority of net-zero related deals are currently concentrated in London , accounting for 36 % of UK deals and a third of the investment value . Outside of the capital , the southeast of England and Scotland account for a greater share of net-zero-related deal count or investment value than their share of UK turnover from low-carbon sector businesses . All other nations and regions have a lower share by comparison .
“ Today ’ s report finds strong growth from challenger and specialist banks , as well as asset finance provision , as businesses seek alternative finance options ,” said Louis Taylor , CEO , British Business Bank . “ There are promising signs of growth in the net-zero deal sector as equity finance markets respond to the growing demand for investment in green innovation .
“ Smaller businesses are clearly adapting to a challenging economic climate , with many reducing their use of external finance . At the British Business Bank , we are committed to supporting these businesses as they seek to achieve sustainable growth and in turn boost economic productivity , by improving their access to external finance .” � www . intelligentfin . tech