Frustrated SMEs turning to unsecured loans to grow businesses
As the UK emerges from the economic crisis caused by the pandemic there are many positive indicators of financial recovery, such as a fall in COVID-induced public spending, a rise in job vacancies and a decline in unemployment, all of which are encouraging businesses to grow.
The economic indicators are good news for SMEs with people spending on home improvements and leisure, as cash saved during the lockdown flows back into the economy.
The SME market makes up over 95 per cent of UK businesses and they are vitally important to the UK economy.
Despite earlier optimism about growing their businesses, many have felt frustration in their ability to obtain business loans from traditional banks and finance firms.
Now a new report suggests that many who are struggling with day-to-day cash flow and the ability to make quick decisions on finances are turning to unsecured loans to take their business forward.
No security is needed for an unsecured business loan, which means the borrower does not have to put assets at risk to secure the funding and allowing for quicker decisions to be made.
Unsecured business loans allow for greater flexibility and give business owners the opportunity to quickly fund their company with the minimum of fuss.
The list of businesses who can apply includes self-employed individuals, sole traders, partnership firms and private limited companies engaged in the business of trading, manufacturing and services.
The report by finance firm iwoca suggested they are now turning to credit brokers, with more than a third applying for loans over a four-week period in May.
Over half of respondents reported that the most commonly requested unsecured loan amount they’d applied for on behalf of their clients was under £50,000, with around 17 per cent requesting £25,000 or less.