Small businesses seeking finance to manage day-to-day cash flow, highlighting cost of living crisis

Managing day-to-day cash flow is the most common reason for small businesses seeking finance, highlighting the cost of living crisis, according to the latest update from small business fintech lender Iwoca.

Iwoca has published its 2022 Q3 Expert Index, which sheds light on how SMEs are preparing to bolster their finances in light of worsening economic conditions, with inflation now over 10 per cent.

The index of UK brokers is based on over 3,000 small business finance applications submitted in September.

The top line finding is that, with inflation at 10.1 per cent, more than two in five brokers say managing day-to-day cash flow is the most common reason for small businesses seeking finance.

The index also revealed the overwhelming majority of brokers (83 per cent) say their SME clients are concerned about their business surviving increased energy prices, even before chancellor Jeremy Hunt’s decision to review the Energy Price Guarantee.

Other findings include one in five brokers (19 per cent) saying it would take over 12 months for the lending market to return to the number of loan requests they received pre-pandemic while a quarter of brokers say that APR is the leading deciding factor for SME owners when choosing between loan offers.

Colin Goldstein, commercial growth director at Iwoca, said: “The challenging economic environment has hit small businesses everywhere. They’re needing to manage cash flow in the face of rising business costs, as well as having to consider the cost of borrowing. At Iwoca, our priority is to continue to support them over the coming months by providing access to finance as soon as they need it.”

Broker Jo Malyon, owner of Blue Badger Financial Limited, said: “Cash flow is the main reason small businesses are applying for finance at the moment.

“This is because of the increases in supply prices, utility bills and inflation, as well as the difficulty they’re facing in passing on additional costs to customers.

“There’s a definite sense of uncertainty in what’s going to happen in the market, and this combined with the rising cost of borrowing is certainly causing SME appetite for finance to decrease. Small business owners are increasingly nervous about taking on any new liabilities."