SME funding appetites saw upturn in Q4 2017

According to the latest SME Finance Monitor from BDRC, SME appetites for funding saw a slight uptick at the end of 2017.

Related topics:  Commercial,  Commercial finance
Amy Loddington
15th March 2018
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The SME Finance Monitor surveys 4,500 businesses every quarter about past borrowing events and future borrowing intentions. 

The proportion of SMEs planning to apply for finance increased during 2017 from 10% in Q1 to 14% in Q4. For 2017 as a whole it was 12%, unchanged from 2016 and slightly lower than the 14% seen in 2012 and 2013. Annual appetite for finance increased by size of SME from 11% of 0 employee SMEs to 17% of those with 50-249 employees. Most of those planning to apply were already using external finance (78%), a higher proportion than in either 2015 or 2016.

In Q4 2017, 41% of applicants were confident that the bank would lend to them. The annual figure (50%) was lower than for 2016 (when 55% were confident) and also lower than current success rates for renewals (97%) or new money (63%). The lower confidence in 2017 was seen to some degree across both larger and smaller applicants and risk rating. Hypothetical confidence amongst those with no plans to apply remained higher (62% in Q4 2017).

In addition to the 12% of SMEs planning to apply for finance, a further 10% were Future would-be seekers who would like to apply but thought that something would stop them. The proportion of all SMEs meeting the definition has declined over time, from 23% in 2012 to 10% in 2017.

The main barrier to applying in 2017 was a reluctance to borrow in the current climate (50% of FWBS), followed by discouragement (22%). Compared to 2016, the economic climate was mentioned slightly less (57% in 2016) and discouragement slightly more (15% in 2016).

Stephen Pegge, Director of Commercial Finance, UK Finance, said:

“This research suggests there has been a recent uptick in demand for finance amongst SMEs, while banks continue to approve around eight in 10 applications from smaller firms.

“It is encouraging that increasing numbers of small firms are looking to use finance to grow their business in the year ahead.

“However, most SMEs are still self-funding, with the vast majority not seeking any new external finance in the past year.

“Just one in 20 SMEs see access to finance as a major obstacle, far behind issues such as red tape, the current economic climate and political uncertainty.

“It appears that most small business owners are carefully considering their options before seeking external finance, with larger SMEs more likely to borrow to help expand their business.”

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