Iwoca index report reveals demand for unsecured finance from SMEs

By Joy Dumasia

According to iwoca’s quarterly SME Expert Index of UK brokers, demand for unsecured finance from SMEs is on the rise. The index, which covers four weeks in May, found that over a third (38%) of brokers had submitted more lending applications for unsecured finance than the four weeks before, suggesting that SMEs are increasingly using credit to support their growth and recovery. Almost one in five brokers (19%) saw demand increase significantly – submitting 50% or more applications than the previous four weeks.

Cash flow remains the key driver for small businesses applying for finance: 32% of brokers said the most requested reason for loan applications in May was managing “day to day cash flows”. Growth comes next, with 23% of brokers stating the top reason their SME clients requested finance was to “grow their business”.

The “approved amount” continues to be the most critical factor for brokers when presenting two competing loan offers to clients, with 23% of brokers highlighting this as having the most impact (25% in Q1 SME Expert Index). “Total cost of borrowing” (19%) and “monthly interest rate” (19%) come next. However, the number of brokers concerned with the level of APR has more than halved since January from 13% to 6%. 

Colin Goldstein, Commercial Growth Director of iwoca: “The SME Expert Index provides vital insights from the broker community into what SMEs need, and how lenders can best support them as they look beyond the Covid-19 crisis. Access to finance is crucial for small businesses who are looking to grow and recover from the pandemic. As social distancing restrictions ease and the economy opens up, it’s encouraging that SMEs are feeling increasingly confident to use credit as an important tool to help them get back on track.” 

Recently, IBS Intelligence reported that European small business lender iwoca announced a UK-first integration with small business platform Xero. iwoca’s invoice checkout – iwocaPay will be integrated into Xero’s platform for enabling small businesses to provide a Pay Later option to their business customers. The collaboration will allow iwocaPay to be directly accessible in Xero.