Majority of SMEs don't want external finance

28 February 2014

Majority of SMEs don't want external financeA widespread investigation into the availability of finance for the UK's small business sector has found that eight out of ten SMEs are "happy non-seekers" of external finance – more than ever before.

The quarterly SME Finance Monitor published by BDRC Continental is one of the largest regular studies of its kind in the UK, with research findings based on more than 55,000 interviews with SMEs. The latest research includes interviews up to the end of Q4 2013.

The research has found that 79% of SMEs in Q4 2013 meet the definition of a "happy non-seeker" of finance – these are SMEs who reported that they had not applied for finance in the previous 12 months and nothing had stopped them. This is up from 73% in Q4 2012 and the highest proportion to date.

According to the report, there is little sign of a frustrated demand for finance, with just 4% of SMEs wanting to apply for finance but feeling that something had stopped them.

Around 70% of all loan and overdraft applications each quarter have resulted in a facility. However, those renewing an existing facility were twice as likely to be successful as those applying for new funds.

Shiona Davies, director at BDRC Continental, said: "SMEs ended 2013 feeling more positive about the economy. However, there are few signs of this leading to an increased demand for external finance. There is little in the way of frustrated demand. Where applications have been made, there is a clear divide in success rates between, on the one hand, the larger established businesses or those renewing existing facilities, and on the other the smaller or younger applicants, especially those applying for the first time who are less likely to be successful."

Other key findings of the BDRC research include:

  • The proportion of SMEs that see the current economic climate as a major obstacle has almost halved to 21% from its peak (37%) at the start of 2012.
  • The proportion of SMEs receiving injections of personal funds went down in Q3 and Q4 2013 (currently 33%).
  • Larger SMEs are more likely to be anticipating growth in the year ahead. Overall, 48% of all SMEs plan to grow in the 12 months after Q4 2013.

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