Brokers preferred alternative lenders for Covid loans
Brokers chose to send more Covid loan applications to alternative lenders than banks, research has found.
Small- and medium-sized enterprise (SME) lender Iwoca has revealed that brokers preferred non-bank lenders for loans from the government schemes and even waited for more to be accredited before submitting applications.
Read more: SMEs start looking for larger loans
Iwoca’s SME Expert Index, based on data from brokers who collectively submitted over 3,500 applications for unsecured finance for their SME clients in December last year, found that 26 per cent sent more coronavirus business interruption loan scheme (CBILS) applications to non-bank lenders in January 2021 compared to December 2020.
For SME clients who requested finance through the recovery loan scheme (RLS) in May, a third of brokers said they waited, or were still waiting for non-bank lenders to be accredited.
Iwoca said the government loan schemes really emphasised the value in alternative lenders as many businesses applying to traditional banks were left waiting for weeks or months without a decision.
Read more: Iwoca broker survey reports rise in demand for recovery loan scheme
“The first half of the year was CBILS centric,” said Calvin Dexter, owner of Calvin Dexter Financial Solutions.
“A big shift in 2021 was that towards alternative lenders: small businesses who ordinarily turned to the banks for support, required other options when they realised the support was not forthcoming.
“As the year progressed, third quarter specifically saw a dislocation in the unsecured funding market as lenders waited an age to be accredited by the British Business Bank for RLS.”
The index also revealed that growth overtook cashflow as the main reason for obtaining finance as the year went on and businesses looked forward to life post-Covid.
Financing for growth was the most common loan purpose for small businesses in the last quarter of 2021 (43 per cent), up from 35 per cent in the third quarter.
Read more: Two more lenders accredited to recovery loan scheme