Small businesses are looking for more – and larger – loans amid increasing fears of a recession, new research from Iwoca has found.
The alternative business lender’s quarterly index found that 13 per cent of brokers identified £200,000+ loans as most sought after for small businesses, the highest proportion since the index was first released in the first quarter of 2021.
Overall demand for business loans is also rising sharply. 46 per cent of brokers said they submitted more applications for small business financing in the last month compared to the previous month. This is a continuation of an upwards trend since the end of last year.
This increased demand for financing, and larger amounts of it, suggests that small businesses are gearing up for cash flow issues, Iwoca said.
37 per cent of brokers said that managing day-to-day cash flow is the most common loan purpose for small businesses, a six per cent increase since the last quarter.
However, this motivation was dwarfed by ‘growing the business’, which was deemed the most common overall reason for small business owners to apply for finance, suggesting businesses are still looking to expand despite cash flow concerns.
The findings come amid worsening economic conditions. 77 per cent of brokers said their small business clients are worried about the possibility of a recession. By contrast, fewer than seven per cent of brokers said their clients were ‘unconcerned’.
“The current economic outlook for small businesses is precarious – we are seeing signs of an increasing number of small- and medium-sized enterprises searching for finance solutions to manage their cash flow and brace for the potential of a recession,” said Steven Scoufarides, head of broker channel at Iwoca.
“But, as they’ve proven time and time again, small businesses are resilient and will shield themselves against this economic threat in every way they can; encouragingly, it looks like most are still seeking finance to grow their businesses, rather than to holster it up.”
Iwoca surveyed UK brokers who collectively submitted over 1350 applications for unsecured finance on behalf of their small business clients in June.