Data from the latest iwoca SME Expert Index shows demand for unsecured finance is now returning to pre-pandemic levels, although it also highlights how small firms are ‘feeling the pinch’ of inflation.

The index, which is based on the insight of UK brokers who collectively submitted over 3,300 SME loan applications in March, revealed that three out of ten brokers feel the small business lending market is back at levels witnessed before the COVID outbreak. In addition, a similar proportion believe the market will return to that level within six months, while just one in ten expect it to take over 12 months to bounce back.

There was, however, evidence of loans increasingly being used to cope with rising business costs. While growth aspirations remained the main reason for loan applications, an increasing proportion of firms were seeking finance to ‘manage day-to-day cash flow’ with more than three in ten brokers identifying this as the key motivator.

Commenting on the survey’s findings, an iwoca spokesperson said it was “reassuring to see the lending market returning to pre-pandemic levels of activity.” However, he also noted that “the inflation crisis is taking its toll on small businesses who are feeling the pinch.”