"The recovery has not been seen to the same extent for all SMEs or across all metrics and with increased use of finance, 1 in 10 SMEs are worried about repaying what they owe."
Demand for SME finance is continuing to increase, with success rates also improving, according to the latest data from BVA BDRC.
88% of applications were successful in Q2, rising to 95% of those who had applied for pandemic related funding (the majority through Government backed schemes).
21% of all SMEs said they were now using more finance than pre-pandemic, including 11% of all SMEs now borrowing where they hadn’t been before, 7% that had taken on extra finance on top of their existing borrowing and 3% that had the same level of facilities but were using them more.
15% of SMEs reported having had a need for funding, up from 9% in 2020. This was typically to fund cash flow (85% of those with a need) rather than business development (19%) and in most cases resulted in an application for funding (83%, with 66% applying to their main bank).
9% of all SMEs (22% of those currently using finance) were concerned about their ability to repay the funding they have, and this increased to 30% of those new to borrowing.
Looking forward, the economic climate remains a barrier but for fewer SMEs than previously. The majority reported being unaffected by the end of the EU transition period but the 26% that had been negatively impacted were more likely to see other barriers to their business. Despite improving application success rates those considering a future application remained less confident of success than pre-pandemic. Overall, growth ambitions were back in line with 2019 as 52% of SMEs planned to grow.
Shiona Davies, director at BVA BDRC, commented: “SMEs were badly hit by the pandemic in Q2 2020. There was something of an improvement in Q3 and Q4 2020, which has continued into 2021, with SMEs in a better mood, over half now expecting to grow, back to 2019 levels of ambition and 88% of applications for funding being successful (95% if applying for a Government backed facility). However, the recovery has not been seen to the same extent for all SMEs or across all metrics and with increased use of finance, 1 in 10 SMEs are worried about repaying what they owe. Future waves of the SME Finance Monitor will continue to track this key market and see how they are coping with the longer-term effects of the pandemic.”