Research reveals European SMEs’ reliance on loans during pandemic

CapitalBox, the leading pan-European online lending platform for SMEs, today unveiled research that shows more than half of European SMEs relied on loans to survive 2020.

There was a variation across countries in how many applied for loans, with more SMEs in Finland applying for loans (60%), followed by Sweden (58%), the UK (56%), the Netherlands (49%), Spain (48%), France (47%), and Germany (46%).

Many of the SMEs surveyed stated that the money was used to cover overheads (35%) and wages (13%) to keep their businesses up and running.

Others used loans to invest and innovate to get them through the difficult year. One third (33%) invested in technology, turning to digital transformation to help them survive. Those in the Netherlands (41%) invested the most in this area of their business. One in five SMEs (21%) used their loans to hire talent to better equip them for the challenges.

The most popular source of funding was retail financing (55%), a form of loan set up to pay back in installments to those with good credit ratings – this was particularly common in France (71%).

Other sources of funding amongst SMEs included:

• 31% applied for government support with the likes of the Coronavirus Business Interruption Loan Scheme in the UK and the ‘Corona Soforthilfen’ in Germany. The survey found that SMEs in the UK (43%) and Finland (27%) were the most reliant on government funding
• Almost a quarter of SME leaders (24%) asked family or friends for financial support
• One in five (21%) turned to credit cards to keep their business running
• Online loan providers have been the saving hand for 11% of European SMEs, and were in high demand in Finland, with more than a quarter (27%) turning to online providers to source the funding they needed.

Scott Donnelly, CEO of CapitalBox said, “The pandemic has left many businesses, especially SMEs, in financially dire straits. Almost two-thirds (60%) of SMEs across Europe have had their cashflow impacted negatively, and many struggled to cover basic outgoings such as overheads and staff wages. For most, the only way out of a very difficult situation has been to secure a loan to get through the pandemic.

“in 2020, the ambition, motivation and resilience of SMEs has been tested like never before. In times like these, it is vital that these financially under-served SMEs get the support they need. Regardless of the source, financial support needs to be fast, fair and safe, getting money to where and when businesses need it most.”