Small businesses are bringing forward their finance applications in order to beat expected further interest rate rises, according to new research.
Four-in-ten (44%) SME leaders expect to bring forward their finance plans in response to the prospect of further rate hikes. It follows the Bank of England’s decision to raise the base rate to 1.75%, with further action expected in the coming months.
Decision-makers at SMEs are therefore keen to lock in lower rates while they can. Overall, more than a third (35%) of small firms expect to apply for finance in the next year, with many looking to grow their businesses.
SMEs are understandably keen to lock in the most favourable rates possible, however some decision makers have concerns about access to finance. Nearly a third (32%) believe it will be harder for their businesses to access finance because of higher interest rates. A similar proportion (30%) say they plan to avoid new borrowing altogether. That is despite the overwhelming majority (81%) having successfully applied for finance previously.
Business loans, whether from high street (28%) or specialist lenders (28%), are the leading form of borrowing for those SME decision-makers who expect to apply for finance in the next year. However, concerningly, some expect to borrow for their business with a credit card (23%), personal loan (25%) or overdraft (21%).
Close Brothers’ research indicates an encouraging trend from SMEs, with many planning to execute finance plans to invest in the coming year. It’s vital that SMEs understand the finance options available to them rather than relying on personal funds or borrowing. Specialist lenders are well placed with the expertise and knowledge to guide businesses during this process.