Are Fast Business Loans Really Helping Small Businesses?

When a business needs funding quickly, it is understandable that owners look for the fastest route to cash. A quick online application and funds in the bank within days can feel like the perfect solution when cash flow is under pressure.

However, new research published today from Responsible Finance, the national membership body for responsible finance providers and Community Development Finance Institutions (CDFIs) highlights a growing concern.

Many businesses are approaching responsible lenders looking to refinance expensive loans that are putting significant strain on their finances. The study analysed 71 refinancing enquiries worth almost £9 million that were submitted to ten CDFIs, including ART Business Loans. It found that businesses seeking help were often carrying multiple high cost loans at the same time, with some paying interest rates of up to 91%.

What the research found

The findings revealed several worrying trends:

More than half of enquiries involved businesses holding multiple loans at once.

The average interest rate on the loans being refinanced was 37.4%.

Some businesses were paying interest rates as high as 91%.

Almost 70% of enquiries had come through commercial finance brokers.

CDFIs were able to help 28 businesses reduce their repayment burden through refinancing.

Perhaps most importantly, the research showed that businesses supported by CDFIs were able to free up an average of almost £10,000 per month in cash flow. That is money that can be invested back into the business, used to recruit staff, purchase equipment or provide a financial buffer during challenging periods.

Why does this happen?

Many businesses do not set out to take on expensive borrowing.

Often, a business needs funding quickly, takes out a short term loan, then finds cash flow remains tight. Additional borrowing is taken to bridge gaps, and before long several loans are being repaid at the same time.

The research found this pattern repeatedly, with loan stacking present in more than half of all enquiries.

How ART Business Loans can help

ART Business Loans was created to support viable businesses that may not be able to access suitable finance from mainstream lenders.

Unlike many fast finance providers, we take the time to understand your business, your plans and your affordability. Our goal is not simply to lend money, it is to help businesses grow sustainably.

As a Community Development Finance Institution, we offer:

Fair and transparent lending

Relationship based support

Affordable repayment structures

Funding for businesses often overlooked elsewhere

A focus on long term success, not short term borrowing

The research showed that average CDFI interest rates were significantly lower than the high cost loans businesses were seeking to refinance.

The biggest lessons from the research is simple.

For businesses seeking funding should explore all of their available options rather than speediest solutions as they must themselves always recognise that the ability to repay is vital. Particularly when taking multiple loans.

If you are considering borrowing, or if existing repayments are becoming difficult to manage, speak to ART Business Loans. We may be able to help you find a more sustainable funding solution.

For brokers and introducers. the research found that almost 70% of refinancing enquiries came through commercial finance brokers, highlighting the important role brokers play in helping businesses access funding solutions.

For brokers and introducers, ART Business Loans can be a valuable option for clients who may not fit a mainstream lender’s criteria, or who would benefit from a more sustainable funding solution than some of the high cost products currently available in the market.

Working with ART can help brokers:

• Find funding solutions for clients who fall outside traditional lending criteria.
• Support businesses looking to consolidate or refinance expensive borrowing.
• Help clients improve cash flow through more affordable repayment structures.
• Demonstrate a commitment to responsible, customer focused funding outcomes.
• Build long term relationships by offering clients an alternative when speed alone is not the most suitable option.

Most importantly, introducing a client to ART is not just about arranging finance. It is about helping businesses access funding that supports sustainable growth, protects cash flow and gives them the best possible chance of long term success.

If you are a business owner that requires funding or are a broker that has a client who is struggling with expensive repayments, juggling multiple facilities, or being turned away elsewhere, speak to ART Business Loans. Together, we can explore a funding solution that works for both the business and its future.