Figures show that businesses are looking for more financing and demand for lending is set to increase in the next 12 months, with 89% of businesses interested in borrowing to cover overheads or refinance existing debt.
150 businesses with 10-100 employees were polled on the outlook for 2023. The survey results showed that more than two in five (43%) plan on borrowing to stay afloat, and just under a third (37%) are borrowing to refinance old debt.
The British Business Bank also found that while total debt held by SMEs has reached new highs, loan repayments are becoming a smaller percentage of business cashflows as those business turnarounds start to recover.
The report suggests a lack of information available to businesses about financial products is concerning, with 10% of respondents saying they needed more clarity about borrowing and 17% saying they wanted a greater selection of loan products to choose from.
Business loan defaults are also on the rise, with a growing number of businesses being over-leveraged and missing opportunities to support growth. Recessions often lead to an increase in business loan defaults, and the CBILS is currently seeing an 8% default rate. That’s £6 billion worth of debt, according to the government.
Chief product officer at Allica Bank, Conrad Ford, said: “It’s the responsibility of banks to give businesses the best chance of surviving and thriving through this economic recession by providing them with the knowledge they need.”
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