Applications for loans over £100k grow by half as SME optimism returns

Three in ten SME finance experts (28%) report that the most requested loan amount at the start of 2024 was over £100,000, 56% higher than the same period last year, according to iwoca’s Q1 2024 SME Expert Index.

The new research, conducted with SME finance brokers who collectively submitted over 2,500 loan applications over a four-week period, shows increasing signs of positivity in the UK lending market for small and medium-sized companies.

Seven in ten (70%) brokers are optimistic about SMEs' prospects in 2024, while just one in twelve (8%) are pessimistic about their clients' outlook for the year ahead.

This comes as nearly two in five brokers (37%) said the number of applications for finance they submitted for SMEs had increased since the last quarter, on top of half (49%) saying the volume of applications had stayed the same.

More than two-fifths (41%) of brokers also reported that the primary purpose of the loans they are applying for is to help SMEs grow their business.

Nearly nine in ten brokers (86%) predict that demand for finance from SMEs will grow in the next six months, the highest level seen over the last six quarters.

To meet the increasing demand, iwoca has secured a new £270 million package of debt funding, pushing its total investment over £1 billion since 2012. This includes £150 million in debt financing from Citibank and Insight Investment to support the company's expansion in Germany, alongside an additional £120 million from Barclays and Värde Partners for its UK operations.

As the UK officially came out of recession, fears of a future recession among the UK’s 5.5 million small and medium-sized enterprises have fallen to their lowest level in almost two years. Two-fifths (40%) of brokers reported that the small and medium-sized companies they act for were still concerned about a recession, down from a peak of three quarters (77%) in Q2 2022.

While recession fears have receded, the data shows that concerns about inflation remain, with four in ten brokers (38%) saying increasing business running costs are their main worry for the SME owners they work with.

Sally Chesterton, Head of Operations at Love Finance, said: "We’re certainly seeing more optimism from small businesses this year, with customers increasingly citing growth as their reason for seeking finance. Falling recession concerns have definitely helped."

Tehmina Mirza, Business Finance Specialist at Connect Mortgages, commented: “High street lenders have their set criteria and are quite inflexible about them. They are picking and choosing the type of business they want to be in. I'm finding more businesses do not fit or meet these parameters, leading to a shift towards alternative lenders.”

Colin Goldstein, Commercial Growth Director of iwoca, added: "The UK's SME lending market is experiencing a resurgence. We're seeing a significant rise in loan applications, with many businesses seeking larger sums to invest in growth. This coincides with low recession fears amongst SMEs – a positive sign that could point to a stronger year ahead for our economy and the small businesses underpinning it.”