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Brokers say cash flow No.1 reason SMEs apply for loans

Most SMEs are applying for loans to cover short-term cash flow problems rather than for longer-term business growth, Iwoca finds.

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Christopher Rieche (right)/Iwoca

SME lender Iwoca has determined that cash flow is the key reason most SMEs apply for finance.

Its new index of UK brokers, which covers a four-week period in January, shows that 41 per cent of brokers said most SMEs apply for loans to ‘manage day-to-day cash flows’.

A quarter of brokers stated that the main reason SMEs required a loan was to help their businesses grow.

Christoph Rieche, CEO and co-founder of Iwoca said: “Brokers play a crucial role in guiding small businesses looking to take on finance, and this new index will provide a unique perspective of the small business lending landscape.”

“Our aim is to be able to better identify small business’ appetite for finance, and how lenders can provide the right support to help them grow.”

The recent results show that SMEs apply for finance to help them cover short-term problems, rather than for other longer-term projects.

Nick Mayhew, Director at Peak Business Finance said: “During a period of such great uncertainty, cash and cash flow are the most important factors in the success of any small business.”

“Small business owners are under cash-flow pressure at the best of times, often due to long payment terms and late payments. Businesses and brokers place an enormous amount of value on speed, as the sooner the cash-flow issues are solved, the sooner the owners can get back to focusing on longer-term projects and growth.”

Iwoca plans to publish the index every other month to help gauge the state of the market and provide valuable insights for lenders and SMEs alike.

For instance, despite the deadline for Coronavirus Business Interruption Loan Scheme (CBILS) loans fast approaching, demand for the government-backed finance remained steady, with 57 per cent of brokers saying demand remained broadly the same between December and January. 

While nearly a fifth (18 per cent) of brokers submitted more applications for CBILS loans in January compared to the previous month and a quarter submitted fewer applications from month to month.

Iwoca’s SME Expert Index is taken from a survey of 139 independent brokers that serve thousands of SMEs between 4 January 2021 and 5 February 2021.  

Iwoca has been an accredited CBILS lender since May 2020 and has previously laid out plans to double its government-backed lending to £200m ahead of the application deadline.

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Christoph Rieche

CEO and Co-founder


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