SMEs seek larger loans as banks reduce lending

Demand for larger loans is growing among UK businesses, according to new data from European small business lender Iwoca.

During the fourth quarter of 2023, 26 per cent of brokers told Iwoca that the most requested loan amount among small- to medium-sized enterprises (SMEs) was above £100,000 – the highest level since the third quarter of 2022.

Iwoca suggested that demand for larger loans indicates that SMEs are seeking longer-term funding, as opposed to choosing smaller loans to ease short-term cash flow concerns.

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Iwoca’s quarterly SME Expert Index also found that despite growing demand for finance, 77 per cent of brokers said that high street lenders are reducing their appetite for funding SMEs.

In response to this, 71 per cent of brokers are submitting the majority of their SME clients’ loan applications to alternative lenders.

“The SME lending market is strengthening, with rising applications for larger loans and falling inflation hinting at a brighter future,” said Colin Goldstein, commercial growth director of Iwoca.

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“However, a number of challenges remain, especially with high street banks showing limited enthusiasm for lending.

“Stability and support are now essential if we’re to see SMEs turn their optimism into growth.”

The index also found that small business owners are less concerned about a possible recession, although high business costs remain their prime worry. 45 per cent of brokers cited high inflation as the main concern for SMEs, compared with just 32 per cent a year earlier .

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