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Significant rise in UK SMEs borrowing money expected in 2023 

 

  • 88% of small and medium sized businesses plan to lean on business finance and credit in the year ahead
  • Seizing growth opportunities (38%) and helping employees with the rising cost of living (34%) are the key drivers
  • Just 12% have no plans to borrow any money over the next 12 months

The majority of UK SMEs (88%) plan to lean on business finance and credit this year according to new research carried out by solution-led fintech provider Nucleus Commercial Finance (NCF).

As the economic situation continues to challenge the outlook and stability of UK SMEs, it is revealed that only 12% of SMEs say they have no plans to borrow any money over the next 12 months – this rises to 29% when including sole traders and micro businesses. With interest rates still at record high levels, this is going to place a real financial burden on UK businesses.

The expected borrowing is not, however, solely to patch holes. The reason most commonly cited by small and medium sized businesses is to enable them to seize growth opportunities (38%). More than a third stated that they plan to borrow in order to help employees with the rising cost of living (34%). A similar number said that borrowing would be driven by a determination to use it to make the business more environmentally sustainable.

Rising costs and financial stress are still having an impact, however. A third (33%) of small and medium sized businesses expect to use business finance to cover unavoidable rising overheads, while one in five (20%) are likely to do so in order to pay off existing debt.

UK SMEs Small & Medium

sized businesses

To seize growth opportunities 31% To seize growth opportunities 38%
To cover unavoidable rising overheads 29% To help employees with the cost of living 34%
To help employees with the cost of living 21% To cover unavoidable rising overheads 33%
To make the business more environmentally sustainable 18% To make the business more environmentally sustainable 30%
To pay off debt 15% To pay off debt 20%

 Crucially, UK SMEs will struggle severely if hung out to dry by Government inaction. Just 4% of SMEs say their business will not require any government support over the next 6-12 months. When we extend this to include sole traders and microbusinesses, this figure rises to 16%. Concern should be heightened by the revelation that less than a third of small and medium sized businesses (31%) say that they have all the support they need.

Chirag Shah, Founder and CEO of Nucleus Commercial Finance comments: “Once again we’re facing a year of turmoil for UK SMEs. With interest rates having ratcheted up, it’s an even more tricky landscape for businesses. That said, it’s certainly not all doom and gloom. The fact that such a notable percentage of SMEs are eager and willing to seize growth opportunities is hugely encouraging.

“What this does mean, however, is that commercial finance providers need to be agile and ready to deliver fast and targeted finance when businesses spy key growth opportunities. Being on hand to provide reliable and seamless access to finance means that the UKs SMEs cannot just survive 2023 but use it as a year in which to truly thrive.”