Fintech iwoca Reports that SMBs are Investing in Growth as Demand for Larger Loans Increases

European Fintech iwoca reports that small business owners are feeling confident about “taking on larger amounts of finance” in order to support their growth objectives this year.

iwoca’s quarterly SME Expert Index (the source of these findings) is reportedly based on key insights from UK brokers who collectively submitted more than 3500 applications for unsecured finance on behalf of their SME customers over a 4-week period in December of last year.

The index confirms that nearly half (43%) of brokers “saw financing for growth as the most common purpose for a loan among SMEs.” This is reportedly the second straight quarter that SMEs have “cited growth as their primary focus, and it’s an upwards trend (up from 35% in Q3).”

As noted in the update from iwoca:

“As economic fears around the spread of the Omicron variant begin to dissipate, fewer than one in ten (9%) brokers reported ‘recovery from lockdown or closure’ as the most common loan purpose for SMEs. This represents a decrease of 11 percentage points since the last quarter, hinting that small business preoccupation with shorter term Covid concerns has evolved into ambitions for expansion.”

These shifts in priorities “reflect a change in confidence in the economy over the past year.” In the first quarter of last year, just 25% of brokers had “cited growth as the most common reason for finance, compared to 43% in Q4.”

Similarly, whilst 41% pointed to “managing cash flow as a primary reason in Q1, this has fallen to 24% as COVID restrictions ease and businesses look forward to life post-pandemic.”

As mentioned in the report from iwoca, the confidence of small businesses in the economic recovery is “reflected in the demand for larger loans.” More than a quarter (26%) of brokers say that loans valued between £100,001 and £200,000 are “the most commonly requested among their SME clients, increasing by 17 percentage points since Q3, when fewer than one in ten (9%) loan requests were of this size.”

In contrast, demand for small loans, “less than £25,000 – which were the most commonly requested in Q3 – has since fallen by 15 percentage points.”

The report further noted:

“Despite the extension of the Recovery Loan Scheme in the Chancellor’s Autumn Budget in November 2021, demand for the government-backed programme hasn’t seen a significant spike. With RLS now set to wind down in June this year, a quarter of brokers (25%) saw demand fall over the last three months, balanced by 32% reporting an increase.”

Colin Goldstein, Commercial Growth Director of iwoca, said:

“This quarter’s SME Expert Index indicates growing confidence among small businesses, who have endured the blow of the Omicron shock. After two years of uncertainty, SMEs are now able to set their sights on growth – an encouraging sign that the mainstay of the UK economy is on its feet once again. We need to continue to support small businesses in accessing finance, to power this growth and contribute to a meaningful economic recovery.”

Broker Sharon Cook, Director of Choice Business Loans, added:

“We had two camps of clients throughout 2021. The first camp: those who needed support recovering from the pandemic, possibly where the assistance on offer at the time was not enough for them. The pandemic has not just caused some businesses to have a huge hole in trading, but it has also delivered other challenges such as supply chain issues and price increases. These things put pressure on SMEs and having access to cash flow solutions to help ease the burden was the number one priority for many business owners.

As mentioned in a release, this SME Expert Index from iwoca aims to offer “a snapshot on what’s driving small business owners to borrow, the trends seen in the types and value of finance being accessed, and how these patterns change as the country emerges from the pandemic.”

iwoca is accredited to the Recovery Loan Scheme, having distributed almost £400 million to small businesses via the UK government’s Coronavirus Business Interruption Loan Scheme (CBILS).

In June 2020 the lender introduced iwocaPay – an online buy now pay later invoice checkout “to help small businesses get paid.”

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