UK: Loan applications by SMEs ‘less likely to be successful than last year’, says BDRC survey

Only 61% of all loan and overdraft applications made so far during 2013 have resulted in a funding

Only 61% of all loan and overdraft applications made so far during 2013 have resulted in a funding facility, compared to 70% to date on the SME Finance Monitor from BDRC Continental whose research goes back to the start of 2010. - Credit: Archant

Borrowing applications by small and medium enterprises (SMEs) this year were less likely to succeed than before, according to a survey.

Figures showed 61% of all loan and overdraft applications made to date in 2013 resulted in a funding facility, compared to 70% to date on the SME Finance Monitor from BDRC Continental, whose research goes back to the start of 2010.

In the third quarter of this year, an all-time low of 15% of SMEs reported a borrowing “event”, including applications, renewals and the automatic renewal of an overdraft.

The survey found that in this period, 78% were described as “happy non-seekers” of finance over the prior 12 months.

Meanwhile, it also identified a “perception gap” between how likely an application would be to succeed.


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In the third quarter, 50% were confident of success on renewing financing, against 94% success, while for new applications, 25% were confident compared to a success rate of 46%.

The level of SMEs reporting growth in the last 12 months was down to 36% compared to 44% in the previous quarter, while 47% said they planned to grow in the next 12 months, down from 51%.

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Shiona Davies, director at BDRC Continental, said there was no evidence of increased confidence driving an appetite for external finance, even amongst those businesses planning to grow.

Anthony Browne, chief executive of the British Bankers’ Association, said small businesses were nearly twice as likely to succeed in accessing finance as they thought.

He said: “With rates at an all-time low there has never been a better time to approach your bank with a business plan.”

But Lee Hopley, chief economist at manufacturers’ organisation EEF, said: “The latest data highlights the continuing challenges small companies have faced accessing finance over the past eighteen months.

“There has been both a downward drift in new applications for finance and, few signs of improvement in success rates.”

SME financing is seen by policy makers as key to growth needed to sustain an economic recovery.

The Bank of England’s Funding for Lending Scheme (FLS) to encourage lenders by making cheap funds available was revamped earlier this year to try to focus efforts on small businesses.

But the latest survey found that just 30% of SMEs were aware of the scheme in the third quarter of this year.

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