Iwoca broker survey reports rise in demand for recovery loan scheme
Brokers have reported increased demand for finance under the recovery loan scheme (RLS), as small businesses become more optimistic about economic conditions for growth.
Alternative business lender Iwoca surveys UK brokers on a quarterly basis to gain an insight into the small business borrowing landscape.
Its third-quarter index found that 35 per cent of brokers said that SMEs’ top motivator for applying for unsecured finance was ‘to grow the business’, a 12 per cent rise from the second quarter.
For the first time since the index was launched, ‘managing day to day cashflow’ was not the most requested reason for applying for unsecured finance, dropping by six per cent quarter-on-quarter.
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There was also a drop in the number of SMEs citing ‘recovery from lockdown or closure’ or to ‘bridge occasional cashflow gaps’ as a reason for needing finance.
Iwoca polled UK brokers who collectively submitted over 1,000 applications for unsecured finance on behalf of their small- and medium-sized enterprises (SME) clients over a four-week period in August.
The Treasury confirmed in last week’s Autumn Budget that the RLS will be extended from the end of the year until 30 June 2022.
Prior to the extension of the RLS, almost 40 per cent of brokers said that they saw an increase in demand for the scheme quarter-on-quarter. One in seven brokers (14 per cent) saw demand increase significantly, submitting 50 per cent or more applications compared to the previous four weeks.
Three-quarters (75 per cent) of brokers submitted a client application to an accredited RLS lender in the third quarter, up from 20 per cent in the second quarter, when brokers opted instead to wait for more lenders to be accredited or applied for a non-government backed product.
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A third of brokers said that they had submitted more lending applications for unsecured finance compared to the four weeks prior, suggesting that more businesses are looking to finance their growth.
The index found that demand for loans under £25,000 had almost doubled compared to the second quarter, making it the most requested amount in the third quarter (32 per cent).
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“The latest findings from our SME Expert Index are encouraging; it’s great to hear from brokers that the small businesses they work with are beginning to feel more confident about their future,” said Colin Goldstein, commercial growth director of Iwoca.
“SME owners, brokers and lenders will welcome the decision by the Treasury to extend the recovery loan scheme, particularly as demand continues to increase.
“Our economic recovery relies heavily on our six million small business owners, so it’s key that companies like Iwoca continue to provide them with access to finance, including the government- backed recovery loans.”