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Most SMEs are not seeking external finance

Eight out of ten SMEs have not sought, or wanted to seek, external finance. Demand remains muted despite the improving economic picture, according to the latest BDRC Continental report, which investigated the availability of external finance for the UK’s small and medium-sized enterprises (SMEs) to the end of Q4 2013. The research is the largest and most frequent study of its kind in the UK, with findings dating back to the start of 2010 and now based on more than 55,000 interviews with SMEs.

Shiona Davies, Director at BDRC Continental, commented:

“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, as eight out of ten SMEs are ‘happy non-seekers’ of finance. 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.”

Headline figures:

  • The proportion of SMEs that see the current economic climate as a major obstacle for their business has almost halved from its peak at the start of 2012, down from 37% to 21%. Amongst larger SMEs the economic climate is now felt to be no more of a barrier than legislation and regulation.
  • The proportion of SMEs receiving injections of personal funds declined in Q3 and Q4 2013 (currently 33%) with fewer SMEs feeling that they ‘had to’ inject funds (15% in Q4 2013 compared to 24% in Q4 2012).
  • Larger SMEs are more likely to be anticipating growth in the year ahead. Analysis by size showed an increasing proportion of larger SMEs with 10-249 employees predicting growth and in Q4 around two-thirds of these SMEs expected to grow in the following 12 months. Overall, 48% of all SMEs planned to grow in the 12 months after Q4 2013.
  • Applications for new/renewed finance were stable but limited and at lower levels in 2013 than 2012. Meanwhile, the proportion of ‘Happy non-seekers’ of finance again increased to 79%, the highest level seen to date with little sign of any frustrated demand for finance.
  • 8% of SMEs had applied for a new or renewed loan or overdraft facility in the 12 months prior to Q4 2013. Levels of application were stable during 2013, but at a lower level than in 2012. There is little sign of a frustrated demand for finance, with a declining proportion of SMEs wanting to apply for finance but feeling that something had stopped them. 4% of SMEs met this definition of a ‘Would-be seeker’ of finance for the 12 months to Q4 2013. Looking forward, 1% of SMEs had an identified need for finance in the next three months and yet did not think they would apply for it.

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