Research from Capital Economics, commissioned by SME lender iwoca, reveals that SMEs receiving a loan are able to boost their monthly revenues by an average of nearly 20%. The recent analysis, which is said to be based on data from current accounts of iwoca customers, indicates that taking out a loan is associated with an “increase in revenues of nearly a fifth (19%) within a year, compared to if no financial support had been accessed.”
The report points to a shift in the overall structure of the SME lending market over the past 10 years. When iwoca launched in 2012, the United Kingdom’s five largest banks accounted for about “60% of SME lending, compared to 40% from challenger and specialist banks.”
That balance has now reversed, with new lenders playing a far greater role. iwoca’s market share has “more than tripled” in recent years, “from 1 in every 1,000 SME loans in 2022 to over 3.5 in every 1,000 last year.”
To meet demand, iwoca has committed funding to the tune of “£1.5bn for UK SMEs by the end of 2026, including £300m of support for construction firms to help deliver the government’s target of building 1.5 million new homes by 2029.”
Since launching in 2012, iwoca has lent over “£4.5 billion to 100,000 UK businesses, providing crucial support to sectors that power the economy.” The report finds that iwoca’s lending supported “£2.8 billion in economic value (GVA) and almost 50,000 jobs across the UK in the past year.”
During the last year, the majority or 75% of iwoca’s loans reportedly went to firms that were located outside of London. For every £100 iwoca lends, £210 of value is “created in the UK economy – underscoring the role of specialist lenders in driving small business growth nationwide.”
Christoph Rieche, CEO and co-founder of iwoca, said that SMEs make up 99% of UK businesses and “over half of our economy, but too many are still locked out of the finance that would help them invest and innovate.”
This report indicates the considerable upside created by fixing that gap. It proves what they “see every day – when small businesses can access the finance they need, they grow, hire and drive prosperity in their communities.” Access to finance isn’t “just a business issue – it’s a productivity issue for the whole economy.”
Andrew Evans, Deputy Chief Economist at Capital Economics, said that their analysis reveals just how useful access to finance can be “for small firms. Businesses receiving an iwoca loan saw inflows to their accounts rise by almost 20% within a year – an impact that is rarely captured in data.”
Evans added that it is evidence “that flexible, fast lending isn’t just helping individual firms grow, but boosting output, jobs and tax revenues across the economy.”
As awareness of non-bank lenders increases, there seems to be “significant potential for this part of the market to help drive UK productivity.”