New research from Hitachi Capital Business Finance (HCBF) has found that a significant proportion of small businesses in the UK are considering finance to enact their plans for 2021, as confidence gradually returns.

Just over half (56%) of small business owners surveyed said they were considering taking finance for some of the plans they had set for 2021, compared to 53% in the last quarter of 2019 — this comes as confidence among small businesses has steadily been returning since the outbreak of Covid-19, explained HCBF.

In quarter four of 2020, over a quarter (27%) of respondents said they expected to grow in the next three months, which is up from 13% in quarter two. Similarly, the proportion of small businesses expecting to scale back fell in this quarter, also to 27%, down from 59% in Q2.

The main reasons that small businesses were considering borrowing money included: increasing headcount (29%); launching new products and services (27%); and running an advertising campaign (22%). The number using finance to launch into new segments in 2021 slightly increased on a year ago from 17% to 19%, reflecting the trend in businesses adapting and pivoting in the new environment.

Compared to 2019, the proportion of small businesses using finance to move to larger premises fell from 20% to 16%, although those in the retail sector considering finance to move premises increased from 19% to 34%, as these businesses adapt to the changing dynamics within the retail space and online demand, added HCBF.  

The research also found that 34% of small businesses that operate predominantly online said they expected to grow in the next three months, compared with 20% of largely offline businesses, while 61% of online businesses had plans that involved financing, compared with 55% of offline businesses. Online businesses were found in the survey to be twice as likely to be using finance to help launch new products (16% vs 9%), pitch for major accounts/new business (12% vs 6%), or launch into new segments (17% vs 8%) as offline businesses.

Joanna Morris, head of insight at Hitachi Capital Business Finance, commented: “Despite a bruising year for small business in the UK, confidence levels are starting to return among some sectors, not far off levels we saw before the outbreak of the pandemic.

“Business owners’ appetite for risk appears to be increasing, with plans being made that have been shaped by their experiences during lockdown. This flexibility and adaptability is precisely the advantage smaller businesses have over their larger competitors, and we are seeing signs this is being used in this research.

“The level to which businesses are embracing technology is a key factor in their confidence, and their plans for the next year. Confidence levels between businesses that have embraced technology and those that haven’t have been dramatically different throughout the events of 2020, and we continue to see differences with plans for 2021.

“The pressure for businesses to embrace technology continues to mount, as those that have already reaped the benefits of their competitive advantage. The case for investing in a business’ tech agility has never been stronger.”

Hitachi Capital Business Finance’s research was conducted by YouGov amongst a representative sample of 1,107 UK small business decision makers spanning industry sectors.