According to nearly a third of brokers (30%) surveyed in iwoca’s latest SME Expert Index, small business lending has already returned to pre-pandemic levels of activity.
Another third (31%) believe the market will return within 6 months, based on the number of loan requests they had each month before the pandemic. Only 10% of brokers expect the market to take over 12 months to bounce back.
iwoca’s Q1 2022 SME Expert Index is based on insight from UK brokers who collectively submitted over 3,300 applications for unsecured finance on behalf of their SME clients in March.
Over a third of brokers (34%) reported an increase in loan applications submitted in the last month compared to the previous month. Managing day-to-day cash flow became increasingly important to SMEs in Q1 2022, with nearly one in three brokers (31%) identifying it as the most common motivator for applying for finance. This is the first time that ‘managing cash flow’ has risen month on month, a significant shift in the downward trend it’s followed since the index began in Q1 2021, and a seven percentage point increase on Q4 2021 when 24% listed cash flow as the top motivator.
The survey also signalled small businesses were looking to access smaller bridging loans – perhaps to cope with these rising costs – with the most commonly requested loan size for SMEs in Q1 2022 being under £25,000. In Q4 2021, by contrast, the most commonly requested loan size lay between £50,000 and £200,000.
Despite the rise in cash flow concerns, growing the business encouragingly remains the most common reason for SME owners to apply for finance, reported by 43% of brokers (same as Q4 2021).
Colin Goldstein, commercial growth director of iwoca, said:
“While it’s reassuring to see the lending market returning to pre-pandemic levels of activity, the inflation crisis is taking its toll on small businesses who are feeling the pinch. Rising fuel and energy costs are the main cost pressures hampering SMEs ability to combat what is expected to be a weaker than expected year of economic growth. As small business owners prepare themselves for cash flow issues in the coming months, it’s vital that lenders offer flexible finance to help them through this.”