5,000 SMEs per quarter share their use and future plans to use external finance, as well as their own business performance. In this latest wave we see SMEs managing their business finance within their means as demand for external finance stabilises.
One of the main findings of the report was that SMEs generally reported a positive outlook, with 79% reporting a profit in Q3 this year and almost a half (48% planning to grow). A record low number of businesses interviewed - just 13% - cited the economy as the biggest barrier to their business in comparison to Q1 2012, where the number was 37%.
Demand for finance is flat - 16% of all SMEs reported a borrowing event in Q3 2015. The number of 'would-be seekers', SMEs that would like to borrow but see barriers, is shrinking over time. It’s now only 3% of SMEs, down from 7% in Q3 2013. At 80% the majority of SMEs however are 'happy non-seekers' of finance.
Despite increasing awareness of crowd funding (37% of SMEs in Q3 2015 excluding PNBs), at 1% only a small number of SMEs are currently using it. A further 7% would consider it – and the majority of these are already using some form of external finance
New analysis placed specifically to further understand the demand for finance reveals that most SMEs (80%), agreed that their current business plans were based on what they could afford to fund themselves (this includes using existing borrowing where available), and 44% of SMEs are finding ways to reduce their need for external finance.
Shiona Davies, Director at BDRC Continental, commented:
“This latest research shows that demand from SMEs for external finance remains flat. Those who do want an overdraft or loan, are increasingly confident of success. They are right to be so, as eight in 10 of all requests for loans and overdrafts are successful and gradually SMEs are realising that they have a good chance of achieving a facility.
“At present most SMEs seem to want to manage their business finance within their means. The SME finance mix includes Trade Credit, maintaining a credit balance and injecting their own funds as needed. Very few are currently using or considering crowd funding but as businesses become more aware of this alternative, this could become part of the SME finance mix.”
Mark Sismey-Durrant, Chief Executive Officer at Hampshire Trust Bank, responds:
“Many businesses continue to say that they are ‘happy non-seekers’ of external financing and we know many have paid down debt during the downturn. However, in order to drive growth businesses need to invest for the future and for those with surplus cash in their current accounts, there is an opportunity to maximise their money by putting it in business savings accounts, which typically offer a better rate of return. We are working with more and more companies every day to provide sustainable finance models to enable businesses to achieve their aspirations, which ultimately should deliver positive growth for the UK economy. Challenger banks can provide alternative lines of credit for those not wanting to ask for more from their main bank, working in partnership with the business to deliver growth. Ambitious businesses should be looking at all their finance options to ensure they are getting the most from their bank – both in terms of the right types of finance but also finding backers whose experience adds real value over the long term.”
