A growing number of small businesses are considering finance to execute their plans for the new year, according to data from Hitachi Capital Business Finance.

Some 56% of small business owners said they were opting for finance to enact plans they had set for 2021 – a 3% increase from the previous year. Confidence among small businesses has steadily been returning since the outbreak of coronavirus.

In the final quarter of 2020, 27% of businesses expect to grow in the next three months, up from 13% in Q2 2020. Meanwhile, the proportion expecting to scale back also fell from 50% to 27%.

Businesses cited reasons such as increasing headcount (29%), launching new products and services (27%), and running an advertising campaign (22%) as the motivation behind any potential borrowing.

Joanna Morris, head of insight at Hitachi Capital Business Finance, said: “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.”

Covid-19 has disrupted the traditional ways of working for many firms, and this is reflected in the way firms have made use of financial support. The proportion of businesses using finance to upgrade to larger premises fell by 4% to 16% triggered by the transition to home working.

This was particularly the case for businesses in the finance and hospitality sectors. Conversely, the proportion of businesses in the retail sector considering new premises increase from 19% to 34%.

As firms struggle to adapt to the new normal, the number of businesses requiring finance to launch into new segments in 2021 increased slightly, from 17% to 19%.

Online advantage

Morris continued: “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 research also revealed that online businesses were more confident about growth in the next three months, with a third of online-based businesses anticipating growth in the next three months, compared to only 20% of offline businesses.

Of the 61% of online businesses with plans involving financing, 16% were hoping to utilise finance to launch new products whilst 12% wanted to pitch for major accounts or new business. 17% hoped to launch into new segments. These three figures were consistently double the proportion of offline businesses.

Morris concluded: “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.”