SME Finance Monitor - BVA BDRC · 2 The SME Finance Monitor Q1 2015 Over 80,000 SMEs have been...
Transcript of SME Finance Monitor - BVA BDRC · 2 The SME Finance Monitor Q1 2015 Over 80,000 SMEs have been...
SME Finance
Monitor
Q1 2015
An independent report by
BDRC Continental, May 2015
2
The SME Finance Monitor Q1 2015
Over 80,000 SMEs have been interviewed since the survey started in Q2 2011
The report and supporting data is made available to all interested parties as a basis for decision
making and strategy setting. It is used by Government, the Bank of England, the IMF and EU, the
banks, trade bodies and academics
• Overdraft and loan events in the past 12 months
• The appetite for new/renewed facilities
• The outcome of applications made, including rates and fees
• Reasons for not borrowing
• Future plans, including demand for future finance
• Awareness of Taskforce, and other, initiatives such as the Funding for Lending scheme
Find out more at www.sme-finance-monitor.co.uk
These charts include data up to the end of March 2015
This survey was commissioned to provide a robust and respected independent source
of information on the demand for, and availability of, finance for SMEs in the UK.
The study covers:
3
Today’s presentation pack
• Provides the usual key highlights from the Q1 data set
• Updates the standard “dashboard” slides seen in previous presentations
• Where possible focusses on data over time to show how this market is evolving
• And also includes reporting on the new questions that were added in Q3 2014, as sample sizes
allow
As usual…
• It is not our remit to assert whether the findings are “good” or “bad”
• And these results are the “tip of the iceberg”
• Most analysis is based on the 20,093 interviews YE Q1 2015. Where feasible, data is also shown
over time. Analysis by application date potentially includes all interviews conducted to date but
much of the analysis focusses on applications made in the past 18 months (Q4 2013 to Q1 2015)
4
Today’s presentation
Context
Borrowing events in the last 12 months
Outcome of applications and renewals
The future
5
Context
Borrowing events in the last 12 months
Outcome of applications and renewals
The future
10
The proportion of SMEs reporting making a profit has increased steadily over recent quarters ….
6% 7% 7% 9% 7% 8% 8% 6% 9% 6% 6% 7% 7%
18% 14% 17% 14% 15% 16% 15% 13% 10% 12% 12% 10% 10%
12% 13%
13% 13% 13% 13% 13% 11% 13% 11% 10% 11% 10%
63% 65% 62% 64% 64% 64% 65% 69% 69% 71% 73% 72% 74%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Most SMEs are profitable (73% YEQ1). Once the ‘don’t know’ answers are removed, 79%
of remaining SMEs in Q1 2015 reported having made a profit and this proportion is
increasing steadily over time, up from 69% in the equivalent quarter of 2013
Q241
Base : All respondents
5023/5000/5032/5000/5000/5000/5008/5028/5000/5008/5023/5024/5038
Profit Loss Broke even DK
Time series: Reported profitability in past 12 months, per quarter
11
… and the proportion rated a minimal or low’ risk has also increased steadily over time. Time series: Risk rating per quarter
Minimal Average Low Worse than average
53% 51% 55% 53% 55% 56% 54% 52% 47% 47% 45% 43% 44%
30% 33% 30% 32% 28% 29% 30% 31%
34% 30% 33% 33% 30%
12% 11% 13% 9% 10% 10% 10% 11% 13% 16% 15% 17% 18%
6% 5% 2% 5% 6% 5% 6% 7% 7% 7% 7% 8% 9%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
The overall risk rating profile is driven by 0 employee SMEs and whilst they are the most likely to
have a worse than average external risk rating (49% in Q1 2015), improvements in their rating in
particular have driven improvements overall (61% had this rating at the ‘peak’ in Q2 2013). Self-
reported credit issues remained relatively rare, and declining over time (8% in Q1 2015).
Risk rating
Base : All respondents with rating
4580/4562/4583/4545/4630/4535/4490/4528/4530/4607/4609/4584/4560
12
Use of external finance was 36% in Q1 2015, in line with 2014 as a whole Time series: Use of external finance per quarter
Use external finance now In past but not now Not in last 5 years
47% 53% 55% 54% 57% 54% 56% 57%
64% 58% 58% 62% 61%
3%
4% 5% 5%
4% 3% 3% 3%
3%
3% 3% 3% 3%
50% 43% 40% 41% 39% 43% 41% 40%
33% 39% 40% 36% 36%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Q15
Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038
A third of SMEs are using external finance – either “core” loans,
overdrafts and credit cards (29% in Q1) and/or other forms of finance
including invoice discounting and leasing (16% in Q1)
13
Over time, there has been declining use of external finance both overall and across all size bands Time series: Use of external finance per quarter
51% 47%
41% 50%
43% 40% 41% 39% 43% 41% 40%
33% 39% 40%
36% 36%
Q1-211
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Q15
Base : All respondents
5063/5055/5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5038
All SMEs
58% 50-249 emps
61% 10-49 emps
48% 1-9 emps
32% 0 emps
Overall use of external finance is driven by the behaviour of 0 employee SMEs. Their use of external
finance has fallen from 41% in 2013 to 37% for 2014 and 32% in Q1 2015, as part of a longer term
decline. Amongst those with employees use of external finance also fell, from 57% in 2013 to 51% in
2014 and was 50% in Q1 2015.
2011: 46% 2012: 44% 2013: 41% 2014: 37%
14
50%
43% 40% 41%
39% 43%
41% 40%
33%
39% 40% 36% 36%
40% 36%
34% 33% 32% 33% 33% 31%
27% 30% 31%
28% 29%
22% 18%
15% 15% 15%
21% 18% 17%
13%
18% 20%
16% 16%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Use of core finance has stabilised over recent quarters, while use of other forms of finance is more varied Time series: Core and other financial products
Q15/14 and others
Base : All respondents
5023/5000/5032/5000/5000/5000/5008/5028/5000/5008/5023/5024/5038
The proportion of SMEs that only use core products (loans, overdrafts and/or credit cards)
was 29% in 2011. By 2014 it had fallen to 20% and was 22% for YEQ1 2015.
8% of SMEs only used one of the other forms of finance recorded (9% for 2013 as a whole),
while 9% used both (as for 2013 as a whole)
Use any external finance now Other Core products
15
30% 34% 34%
37% 41%
36% 40%
41% 48%
39% 40%
47%
48%
50%
43% 40% 41%
39% 43%
41%
40% 33%
39% 40%
36% 36%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
The proportion of “Permanent non-borrowers” maintains an upward trend Time series: Permanent non-borrowers and users of external finance
The ‘Permanent non-borrowers’ are not using external finance and show no
inclination to do so. For 2014 as a whole, 43% met the definition, up from 34% in
2012. Over the same period, the proportion using external finance has fallen from
44% to 37%. In Q1 2015 the gap between the two was 12 percentage points.
Q15/14 and others
Base : All respondents 5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024
Use external finance now Permanent non-borrowers
16
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Amongst those with no employees the “gap” between PNBs and those using finance is widening Time series: Permanent non-borrowers and users of external finance – 0 employee SMEs
Q15/14 and others
Base : All respondents with 0 employees
Use external finance now Permanent non-borrowers
38% 35%
32%
37% 44%
48%
From 2013, SMEs with 0 employees have been more likely to be a PNB
than to use external finance, and this gap is widening (from nothing in
2012 to 21 percentage points in Q1 2015)
53%
32%
17
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Those with employees are more likely to be using external finance than be a PNB, but the gap is narrowing Time series: Permanent non-borrowers and users of external finance – SMEs with employees
Q15/14 and others
Base : All respondents with employees
Use external finance now Permanent non-borrowers
59% 57%
51%
24% 27%
32%
SMEs with employees remain more likely to be using external finance
than to be a PNB. However the “gap” has reduced from 35 percentage
points in 2012 to 15 in Q1 2015
35%
50%
18
The group of SMEs neither using external finance nor a PNB is getting somewhat smaller Time series: Use of external finance per quarter
Use external finance now Not PNB but no finance PNB
30% 34% 34% 37% 41% 36% 40% 41%
48% 39% 40%
47% 48%
20% 23% 26% 22%
20% 21%
19% 19%
19%
22% 20% 17% 16%
50% 43% 40% 41% 39% 43% 41% 40%
33% 39% 40%
37% 36%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Q15
Base : All respondents 5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5038
Recently, as the proportion of PNBs has increased, the “middle group” has reduced in
size (as the proportion using external finance has stabilised) – this is due to changes
amongst 0 employee SMEs
22
54%
16%
13%
17%
All SMEs
Just under half of SMEs offer and/or receive Trade Credit. 1 in 6 do both, increasing by size of business NEW QUESTION: Role of Trade Credit in the business Q3 14 – Q1 15 only
Q14y Does the business offer or receive Trade Credit?
Base : Q314-Q115 15085 3003/4994/4833/2255
Offer only
Receive only
No Trade Credit
Offer & receive
Offer: 30%
Receive: 33%
59%
40%
28% 25%
15%
19%
16% 13%
13%
13%
14%
13%
12%
27% 44%
50%
0 Emp 1-9 emp 10-49 emp 50-249 emps
Offer: 25%
Receive: 27%
Offer: 40%
Receive: 46%
Offer: 58%
Receive: 60%
Offer: 63%
Receive: 63%
23
1 in 5 of all SMEs say they need less external finance because they receive Trade Credit NEW QUESTION Impact of receiving Trade Credit– All SMEs Q3 14 – Q1 15 only
Require less finance
Not sure
Do not require less finance
72%
54%
41% 39%
1%
2%
3% 4%
9%
14%
17% 17%
18%
30% 39% 40%
0 Emp 1-9 emps 10-49 emp 50-249 emp
67%
1% 10%
21%
All SMEs
Q14y3-5 Impact of Trade Credit?
Base : All SMEs from Q314
No Trade Credit received
21% of all SMEs say that they need less external finance because they receive trade credit from
suppliers, increasing by size from 18% of those with 0 employees to 40% of those with 50-249
employees. This is the equivalent of two thirds of those receiving Trade Credit say it reduces their
need for external finance, and this varies little by size.
24
Fewer than 1 in 10 SMEs say they need more external finance because they offer Trade Credit to customers NEW QUESTION Impact of offering Trade Credit– All SMEs Q3 14 – Q1 15 only
Require more finance
Not sure
Do not require more finance
75%
60%
42% 36%
1%
3% 5%
19%
28%
37% 40%
6% 12% 18% 19%
0 Emp 1-9 emps 10-49 emp 50-249 emp
70%
1%
22%
7%
All SMEs
Q14y3-5 Impact of Trade Credit?
Base : All SMEs from Q314
No Trade Credit offered
7% of all SMEs say that they need less external finance because they receive trade credit from
suppliers, increasing by size from 6% of those with 0 employees to 19% of those with 50-249
employees. This is the equivalent of a quarter of those offering Trade Credit say it increases their
need for external finance, and this varies little by size.
26
16% 20%
16% 19% 20%
18%
18%
15% 15% 13% 14%
14%
25% 26% 24%
21% 22% 20%
15%
15% 15% 15% 15%
11%
41%
46%
40% 40% 42%
38%
33% 30% 30%
28% 29% 26%
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
There has been a steady decline in injections of personal funds (from a peak of 46% in Q3 2012) Time series: Injections of personal funds in previous 12 months
Q15d and others
Base : All respondents
5000/5000/5000/5008/5026/5000/5008/5023/5024/5038
Felt had to inject funds Chose to inject funds Any injection of funds
The proportion of SMEs injecting funds has fallen from a peak of 46%
in Q3 of 2012 to 26% in Q1 2015. There has been a reduction in
those saying they “had” to inject funds (26% to 11%), with a smaller
reduction in those choosing to inject funds (20% to 14%) – and
separately fewer SMEs plan to inject funds in future
27
38% 38% 38%
16% 16%
11%
Including trade credit and personal injections increases net use of ‘business funding’ from 38% to 65% for SMEs overall Use of business funding (net) YEQ1 2015
Base : YEQ1 15 All respondents 20,093
External
finance
Trade
credit
Personal
funds
38% 54% 65%
+ +
The chart shows the incremental effect of including different types of funding, over and
above the types of external finance detailed in the Monitor. 16% of SMEs do not use
external finance but do use trade credit, while 11% do not use either external finance or
trade credit but have injected personal funds into the business in the previous 12 months
28
38%
16%
11%
All SMEs
Broadening the definition of “business funding” has most impact on the smaller SMEs Use of business funding (any) YEQ1 2015
Q15/14y/26d Base : YEQ1 15 All respondents 20,093 4008/6647/6433/3005
Personal funds
Trade credit
External finance
65% use business
funding
Including trade credit and personal injections of funds boosts the proportion of 0 employee
SMEs using “business funding” from 33% to 61%. The uplift is less marked for larger
SMEs who are more likely to be using a range of sources of external finance.
33%
49% 59% 62%
15%
19%
19% 18%
13%
6%
2% 1%
0 Emp 1-9 emp 10-49 emp 50-249 emp
61% 74% 80% 81%
30
7% 8% 6% 5% 6% 8% 8% 9% 9% 9% 11% 9% 9%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
The proportion of SMEs that export has stabilised, with fewer now saying it accounts for 50% or more of their turnover
Time series: Exporters
Q223
Base : All respondents 5055/5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5024
All SMEs
26% 50-249 emps
21% 10-49 emps
12% 1-9 emps
8% 0 emps
In 2013, around a quarter of exporters said that exporting made up half or more of their turnover. This had
dropped to 13% for Q1 2015, for both larger and smaller SMEs.
The proportion of exporters has increased somewhat over time, from 6% of all SMEs in 2012 to 10% in
2014. This is due to more of the smaller SMEs exporting (0 employees from 5% to 8%, 1-9 employees from
9% to 14%). The proportion of larger SMEs that export has been more stable (22% for 10-49 and 33% for
50-249 emps for 2014). Q1 figures in line, albeit with a reduction in exporting amongst the largest SMEs
In Q1 2015, the equivalent of 5% of all SMEs planned to grow by selling (more) into overseas markets and
this was more common amongst larger SMEs (12% of those with 10-249 employees) than amongst smaller
SMEs (5% of those with 0-9 employees).
31
Context
Borrowing events in the last 12 months
Outcome of applications and renewals
The future
32
7 in 10 SMEs agree that they are looking to be debt free if possible NEW QUESTION Attitudes to finance– Q3 14 – Q1 15 respondents only:
Q238a5
Base : All SMEs Q314-Q115 15,085
33%
31%
32%
21%
39%
19%
11%
10%
Aim to pay down debt and remain debt free
Aware of external risk rating
Happy to use external finance to help businessgrow
If interest rates increased by 2% we wouldstruggle
Agree Agree strongly
72%
50%
43%
31%
33
39% 44% 44%
Q3 14 Q3 14 Q1 15 Q2 15
There has a slight increase in the proportion prepared to borrow to grow, due to the 0 employee SMEs Time series: Attitudes to finance
69% 73% 74%
Q3 14 Q3 14 Q1 15 Q2 15
Base : All respondents 5008/5023/5038
All SMEs
73% No emps
76% Emps
42% No emps
51% Emps
Agree: Aim to pay down
debt and remain debt free
Agree: Happy to use
external finance to help
business grow
34
Larger SMEs are more likely to know their risk rating and to be happy to use external finance in the business NEW QUESTION Attitudes to finance– Q3 14 – Q1 15 respondents only:
Q238a5
Base : All SMEs 15,085
71%
47%
40%
30%
73%
56%
49%
30%
74%
66%
57%
26%
71%
71%
58%
22%
Aim to pay down debt and remain debt free
Aware of external risk rating
Happy to use external finance to help businessgrow
If interest rates increased by 2% we wouldstruggle
0 emps 1-9 emps 10-49 emps 50-249 emps
35
36%
3%
27%
34%
1 in 3 SMEs agree they prefer to be debt free but would also be happy to use finance to help the business grow NEW QUESTION Attitudes to finance– Q3 14 – Q1 15 respondents only:
All SMEs
Q238a5
Base :All SMEs Q314-Q115 15,085
36% of SMEs aim to be debt
free but would be happy to
use external finance to help
the business grow (42% if
have employees)
3% are not looking to be debt
free and would be happy to
use external finance to help
the business grow (4% if have
employees) 27% aim to be debt free and would not
be happy to use external finance to
help the business grow (22% if have
employees) – the ‘debt averse’
34% gave some other
combination of predominantly
“neutral” answers
39
The majority of SMEs continue to meet the definition of a ‘Happy non-seeker’ of finance
65% 66% 67% 73% 76% 76% 78% 79% 82% 78% 77%
82% 79%
10% 10% 11% 7%
7% 6% 7% 4%
4% 5% 5%
3% 3%
25% 24% 22% 21% 17% 19% 15% 17% 14% 17% 18% 15% 18%
Yr to Q112
Yr to Q212
Yr to Q312
Yr to Q412
Yr to Q113
Yr to Q213
Yr to Q313
Yr to Q413
Yr to Q114
Yr to Q214
Yr to Q314
Yr to Q414
Yr to Q115
Q115/209
Base : All respondents
5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/5038
Time series: Borrowing profile in 12 months prior to interview New definition from Q4 2012:
“did anything stop you applying” Had any event Would be seekers Happy non-seekers
Event in:
The proportion of Happy non-seekers has increased over time, from 68% for 2012 to 79%
for 2014 as a whole. Over the same time period, the proportion reporting a borrowing event
has declined from 1 in 4 to 1 in 6 SMEs. Q1 2015 saw the proportion of Happy non-seekers
stable and a slight increase in the proportion reporting a borrowing event.
40
Applications for new/ renewed facilities and automatic overdraft renewals have been stable over recent quarters Time series: Borrowing events in 12 months prior to interview
12% 11%
10% 9%
8% 9%
7% 8%
7% 8% 8%
7% 8%
4% 3% 3%
4% 3% 3% 3% 3% 3% 3%
5%
3% 4%
2% 1% 1%
2% 2% 2% 1%
2% 2% 2% 3%
1%
3%
12% 12% 10%
9% 8% 8%
7% 8%
6% 7% 7%
6%
8%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Q26
Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038
Interviewed in:
Type 2 Type 1 Type 3 Auto renewal
In Q1 2015, 8% of SMEs reported having applied for new/renewed facilities (ie a Type 1 event) in the previous
12 months. As many SMEs had experienced the automatic renewal of an overdraft (8%). These figures have
changed very little across 2013 or 2014, but remain at lower levels than were seen in 2011-12.
44
“Discouragement” and the “Process” of borrowing remain the key barriers to applications for loans or overdrafts
Q116a/210a
Base : YEQ1 215 All “would be seekers” 443/321
Main reason for not seeking borrowing – All “Would be seekers” YEQ1 2015
14% of Would-be overdraft seekers 12% of Would-be loan seekers
Principle: prefer not to lose control, or
can get funds elsewhere: no longer
includes “prefer not to borrow”
38% of Would-be overdraft seekers 34% of Would-be loan seekers
Process: think it’s too expensive, too
much hassle, needs security
35% of Would-be overdraft seekers
(25% indirect v 11% direct)
44% of Would-be loan seekers
(32% indirect v 12% direct)
Discouraged: had asked informally but
felt put off, or assumed would be turned
down
5% of Would-be overdraft seekers 3% of Would-be loan seekers
Climate: felt it was not the right time to
borrow in the current economic climate
3% of SMEs wanted to apply for an
overdraft , but didn’t– why not?
2% of SMES wanted to apply for a
loan but didn’t – why not? Main reason for not applying
4% of SMEs were “Would be seekers” of finance
45
Context
Borrowing events in the last 12 months
Outcome of applications and renewals
The future
46
76% of applications made in the last 18 months were successful, with improving success rates in recent quarters Time series: Outcome by application date – ALL applicants / renewals (loans and overdrafts)
4% 3% 6% 4% 7% 8% 4% 6% 8% 8% 1% 9%
28% 29% 26% 21%
30% 33% 23% 23% 14% 17%
10%
17%
12% 14% 17% 17% 13% 15% 11% 16% 16% 10% 12% 12%
55% 54% 51% 58% 51% 43%
62% 56% 63% 65%
77% 62%
Q64/66/81/92/97
Base : All interviews to Q2 2013 All respondents who have had response from bank
From Q4 13: 589/537/538/323/282 INTERIM DATA
74% 67%
Q112
68% 68%
Applied: Q212
Offered what wanted and took it Have facility after issues Took other funding instead No facility
Q312
58%
Q113
75%
Q412
64%
Q213
73%
Q313
72%
Q413
79%
76% of applications made in the last 18 months (Q4 2013 to Q1 2015) were successful. Initial
data for applications made in Q1 2015 suggests that 71% were successful.
Q114
75%
Q214
89%
Q314 Q414
47
Almost all renewals are successful. Applications for new money have become increasingly likely to be successful Time series: Outcome by application date – ALL renewed v new money (loans and overdrafts)
Base : All applicants
Renewals: 242/244/ 238/144/134 INTERIM DATA New money 304/262 282/164/136 INTERIM DATA
Applied in:
97%
85%
92% 95% 97% 94% 96% 98% 98% 98% 94% 99% 96%
53% 54%
47% 52%
57%
36% 41%
56% 59%
66% 63%
81%
61%
Q4 11 Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214* Q314* Q4 14*
% have new loan/overdraft facility % have renewed loan/overdraft facility
Those who have borrowed before remain more likely to be successful with an
application for new money (73% in 18 months to Q1 2015) than FTAs (55%) but
success rates for both have improved since 2013
49
2% 4% 15% 7% 4% -1% 4% 4% 2% 1% 6% 11% 11%
21% 15% 16% 17% 8% 9%
19% 12% 2% 4%
74% 81% 74% 82% 78% 78% 90% 89%
79% 82% 97% 92%
Taking both loans and overdrafts together, almost all renewals have been successful… Time series: Outcome over time – all applications made in each quarter (loan or overdraft)
All respondents who have had response from bank Renewals From Q413: 242/244/ 238/144/134 INTERIM DATA
Renewals, by application date
85% 92% 95% 97%
Q112 Q212
Offered what wanted and took it Have facility after issues Took other funding instead No facility
Q312 Q412
94%
Q113
95%
Q213
98%
Q313
98%
Q413
98%
98% of renewal applications made in the last 18 months (Q4 2013 to Q1 2015) were
successful. This has changed relatively little over time
Q114
94%
Q214
99%
Q314 Q414
96%
50
7% 5% 8% 7% 9% 10% 7% 9% 13% 9% 2% 14%
39% 48% 40% 37%
54% 49% 38% 32% 21% 28%
16%
25%
13% 16% 15% 19% 10% 17% 13% 19% 13% 9%
17% 15%
41% 31% 37% 38%
26% 24%
43% 40% 53% 54%
64%
46%
Applications for new money have been more likely to be successful in recent quarters Time series: Outcome over time – all applications made in each quarter (loan or overdraft)
All respondents who have had response from bank New money From Q413: 304/262 282/164/136 INTERIM DATA
New money, by application date
54% 47% 52% 57% 36% 41%
Q112 Q212
Offered what wanted and took it Have facility after issues Took other funding instead No facility
Q312 Q412
56%
Q113
59%
Q213
66%
Q313
63%
Q413
81%
65% of new money applications made in the last 18 months (Q4 2013 to Q1 2015)
were successful, and this proportion is increasing steadily over time
Q114 Q214 Q314 Q414
61%
53
Across the most recent 18 month period, 8 in 10 of those who applied now have an overdraft. Result of overdraft applications applied for Q4 2013 to Q1 2015
Q64/66/81/92/97
Base : All applicants Q413 to Q115 who have had response from bank 1550
Offered what wanted and took it
Have overdraft after issues
Took other funding instead
No overdraft
70%
14%
5%
12%
82% of overdraft applicants
now have a facility
All analysis of applications is now made by
application date rather than interview date. To
ensure robust base sizes for sub-groups,
analysis is based on all applications made in the
last 18 months, that is Q4 2013 to Q1 2015
The current success rate (82%) continues the
trend for increasing success rates for
overdrafts:
• 18 months to Q1 2013, 72%
• 18 months to Q1 2014, 75%
54
In 2014 to date, more than 8 in 10 overdraft applications have been successful Time series: Outcome by application date – ALL overdraft applicants / renewals
3% 2% 2% 5% 4% 5% 4% 5% 7% 4% 1% 6%
27% 26% 22% 19% 30% 21%
15% 21%
8% 12% 11% 10%
14% 12% 17% 15% 13% 20% 9% 10% 17% 12% 7% 13%
57% 59% 60% 61%
53% 54% 72% 64%
68% 71% 81% 71%
Q64/66/81/92/97
Base : All applicants interviewed to Q1 2015 All respondents who have had response from bank
From Q1 2014: 356/347/216/180 SMALL BASE interim data
Q112
71% 71%
Applied: Q212
Offered what wanted and took it Have facility after issues Took other funding instead No facility
Q312
66%
Q412
77% 76%
Q113 Q213
74%
Typically the proportion who end the process with an overdraft is very similar to the proportion
offered one (including those that had issues with the offer). Current data for 2014 to date shows
higher initial success rates translating into higher success rates overall.
81%
Q313
74%
Q413 Q114
85% 83%
Q214 Q314
88%
Q414
84%
55
Overdraft success rates for 2014 to date are higher than predicted by the profile of applicants
Time series: Outcome by application date – overdrafts compared to predictive model
Q64/66/81/92/97
Base : All applicants interviewed to Q4 2013 All respondents who have had response from bank
527/656/425/355/452/466/372/348/379/315/298/165 SMALL BASE interim data
Applied in:
71% 71% 77% 76%
66%
74% 81%
74%
85% 83% 88%
84%
71% 74%
78%
74% 75% 75%
80%
76%
80% 80% 79%
75%
Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214* Q314* Q414*
% have overdraft facility % predicted to have facility
The model has predicted slightly higher success rates for most of the quarters since
Q3 2013. Success rates for 2014 have been above those predicted by the model.
61
24%
9%
17%
50%
Across the most recent 18 month period, two thirds of those who applied now have a loan.
Base : All applications made Q4 2013 to Q1 2015 who have had response from bank 838
Result of loan applications applied for Q4 2013 to Q1 2015 Offered what wanted and took it
Have loan after issues
Took other funding instead
No loan
67% of loan
applicants now
have a facility
All analysis of applications is now made by
application date rather than interview date. To
ensure robust base sizes for sub-groups,
analysis is based on all applications made in the
last 18 months, that is Q4 2013 to Q1 2015.
The current success rate of 67% continues the
steady improvement seen over recent quarters
• 18 months to Q1 2013, 60%
• 18 months to Q1 2014, 59%
62
There is no clear pattern for loan success rates, but they have been somewhat higher in more recent quarters Time series: Outcome by application date – ALL loan applicants / renewals
8% 4% 13%
3% 11% 11% 3% 8% 9% 13% 1%
14%
32% 35% 34%
25%
31%
52%
36% 24% 26% 26%
10%
31%
8% 17% 18% 22%
12% 9% 15% 26%
12% 7% 22%
11%
52% 44% 35%
50%
46%
27%
46% 42%
52% 53%
67%
44%
Base : All interviews to Q1 2015 All respondents who have had response from bank
From Q4 2013 210/181/191/107/102 SMALL BASE interim data
Q112
60% 61%
Applied: Q212
Offered what wanted and took it Have facility after issues Took other funding instead No facility
Q312
58%
Q412
53%
Final success rates typically mirror the initial response from the bank.
The higher success rate in Q3 2014 reflects the initial response from
the bank in that quarter.
72%
Q113 Q213
36%
Q313 Q413
61% 68%
Q114 Q214
64% 60%
Q314 Q414
89% 55%
63
The model suggests a gradual improvement in loan success rates, while actual results are more variable Time series: Outcome by application date – loans compared to predictive model
Base : All interviews to Q2 2014 All respondents who have had response from bank 1
267/293/287/225/189/222/212/176/183/182/123/125 SMALL BASE interim data
Applied in:
60% 61% 53%
72%
58%
36%
61% 68% 64% 60%
89%
55%
55%
61% 57%
63% 63% 58%
61% 62% 64% 65% 64% 64%
Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214* Q314* Q414*
% have loan facility % predicted to have facility
Loan success rates to date have typically been close to those predicted (with Q2
2013 and Q3 2014 as obvious exceptions). The model for loan success rates
explains less of the variance in success rates than the model for overdraft success
rates.
65
Context
Borrowing events in the last 12 months
Outcome of applications and renewals
The future
66
4 in 10 SMEs (43%) said they plan to grow, in line with Q4 2014, but lower than previous quarters Growth objectives for next 12 months – Q1 2015 respondents:
8%
35%
48%
4%
6%
Grow substantially
Grow moderately
Stay same size
Become smaller
Sell / pass on
Plan to grow
(over time)
Q1 2013 48%
Q2 2013 51%
Q3 2013 47%
Q4 2013 48%
Q1 2014 45%
Q2 2014 53%
Q3 2014 46%
Q4 2014 43%
Q1 2015 43%
Q225 Growth plans in next 12 months
Base : All SMEs Q1 5038
68
46% 46% 45% 41%
47% 50%
43% 46%
41%
50%
40% 39% 39%
51% 50% 49% 49% 51%
56% 56% 53%
57% 59%
56% 52% 51%
56% 59%
52%
58% 54% 57%
60%
64% 68% 67%
69%
63% 65%
65% 66%
61% 61%
66% 65% 69% 69%
72% 72% 69% 70% 70%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q314 Q414 Q115
Appetite for growth amongst the larger SMEs is more consistent, unlike the smaller SMEs Time series: Have plans to grow
Q225
Base : All respondents Q1 2015 5038
0 emps 1-9 emps 10-49 emps 50-249 emps
Since 2012, SMEs with 10-249 employees have become increasingly likely to be
planning to grow and have maintained most of those gains in recent quarters.
Those with 1-9 employees appear to have lost the gains made since 2012. The
appetite for growth amongst those with 0 employees has always been more
volatile, but is currently lower than in 2012.
69
The economic climate remains (just) the main barrier to running their business for the next 12 months Main barriers to running business in next 12 months – Q1 respondents only:
Excl
PNBs
8-10
10%
7%
9%
18%
17%
12%
Q227 Barriers to running business as would want in next 12 months
Base : All SMEs Q1 5038 Excluding pnb 3220
* Revised code Q3 14 ** New code Q3 2014
53%
60%
64%
73%
77%
76%
80%
33%
26%
22%
18%
14%
17%
12%
13%
12%
10%
8%
6%
4%
6%
The current economic climate
Legislation & regulation
Political uncertainty/future govt policy**
Cash flow / late payment
Access to external finance
Availability of relevant advice
Recruiting and retaining staff*
1-4 limited obstacle 5-7 moderate obstacle 8-10 major obstacle
14%
70
“The current economic climate” is less of a barrier, and two thirds do not see any of these as main barriers in Q1 2015 Time series: 8-10 Main barriers to running business in next 12 months
37% 35% 34%
31% 32%
28% 26%
21% 20%
17% 16% 14% 13%
14% 14% 13% 12% 14% 14% 14%
11% 12% 12% 12% 11% 12% 14% 14% 14%
11% 12% 11% 11% 10% 8%
10% 9% 8% 8%
11% 11% 13%
10% 12%
10% 10% 8% 7% 8% 7% 6% 6% 5% 6% 6% 6% 7% 6% 6% 6% 5% 6% 5% 6%
4%
Q112 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
The current economic climate Legislation & regulationCash flow / late payment Access to external financeAvailability of relevant advice
Q227 Barriers to running business as would want in next 12 months
Base : All SMEs 5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038
The proportion saying none of these are major barriers has increased from half in 2012 (52%) to two thirds
in Q1 2015 (68%) despite adding an extra factor (political uncertainty 10%). Those who did not identify any
of these as major issues did not consistently identify any other barriers when asked
71
The economy, and all other issues, continue to be mentioned more by those with any appetite for future borrowing
Main barriers to running business in next 12 months – by plans for next 3 months (Q1 2015)
25%
21%
16%
17%
18%
9%
10%
9%
9%
8%
5%
2%
3%
5%
The current economic climate
Legislation & regulation
Political uncertainty
Cash flow / late payment
Access to external finance
Availability of relevant advice
Recruiting & retaining staff
Q227 Barriers to running business as would want in next 12 months
Base : Q1 All SMEs 1374/3664
Plan to borrow/FWBS Future HNS
76% of Future happy non-seekers did
not rate any of these as major
obstacles, compared to 44% of those
with any appetite for future borrowing
72
11% 11% 13%
10% 12%
10% 10% 8% 7% 8% 7% 6% 6%
15% 16% 18%
14%
18% 15% 16%
12% 11% 12% 11% 10% 10%
22% 24%
26%
21%
27% 24% 25%
18% 16% 17% 17%
13%
18%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Access to finance has been somewhat less of a barrier since 2014, especially for those with any appetite for finance
Time series: % Rating ‘Access to Finance’ a major obstacle for next 12 months
All with plans to apply/FWBS All SMEs All excluding PNBs
Q227a
Base : All 5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038
The proportion of SMEs rating access to finance as a major obstacle has declined
somewhat over time. Those with plans to apply, or defined as ‘Future would-be seekers’
are more likely than others to see Access to Finance as a major obstacle, but this has
fallen from a high of 27% in Q1 2013 to 18% in Q1 2015. These SMEs are also more
likely to rate all the other barriers tested as ‘major obstacles’
73
43% 42% 38%
27% 29% 22% 23%
19% 25%
26% 21% 20% 18% 16% 14% 13% 12% 9%
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
The economy remains something of a barrier for those planning to apply for finance
Time series: % Rating ‘The economic climate’ a major obstacle for next 12 months
All with plans to apply/FWBS
Q227a
Base : All 5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038
22% 20% 23% 17% 14% 16% 19%
14% 17%
7% 6% 7% 6% 6% 7% 5% 5% 5%
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
All HNS
Time series: % Rating ‘Cash flow/late payment ’ a major obstacle for next 12 months
74
There is some evidence that these increased concerns are due to circumstances within the business
Key demographics– by plans for next 3 months (Q1 2015)
30%
28%
51%
19%
62%
70%
18%
32%
20%
24%
25%
40%
13%
32%
82%
8%
41%
4%
Have employees
Min/Low risk rating
Plan to grow
International
Use external finance
Made a profit
Made a loss
Hold £5k+ credit balances
Self reported credit issue
Q227 Barriers to running business as would want in next 12 months
Base : Q1 All SMEs 1374/3664
Plan to borrow/FWBS Future HNS
Those with any appetite for finance are
more likely to be already using finance,
planning to grow, and to be international.
They are also more likely than WBS to
have made a loss or had a self reported
credit issue.
These differences are
also evident for 2013
and 2014 as a whole
76
Most SMEs are ‘Future happy non seekers’ as fewer meet the definition of ‘would-be seekers’ Time series: Anticipated borrowing profile for next 3 months after …
Have plans to apply/renew Would be seekers - with need Would be seekers – no need Happy non-seekers
60% 64% 63% 65% 67% 67% 70% 68% 72% 68% 69% 75% 75%
23% 19% 22% 19% 16% 17% 15% 16% 15%
17% 14% 11% 10%
2% 3% 3% 2% 3% 2% 2% 1% 1% 1% 2%
1% 1%
16% 14% 12% 14% 15% 14% 12% 15% 12% 14% 15% 13% 14%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Each quarter, the majority of SMEs have expected to be “happy non seekers”. Over time, this proportion
has increased slightly, as the proportion of ‘future would-be seekers’ has declined
Q229
Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5028/5000/5023/5024/5038
85
SME confidence that their bank will agree to a future lending request remains higher than in 2013
Q238
Base : All planning to apply for new/renewed facilities 669/713/547/607/610/574/538/699/526/592
Although improving, levels of confidence remain below the actual success rates (which are
also improving). In the last 18 months success rates for renewals have been 98%
compared to current confidence levels of 57%, and for new facilities success rates are
65% against a confidence level of 36%
Time series: Confidence bank will agree to facility next 3 months
23% 26% 29% 21% 21% 18%
28% 23% 26%
17% 4%
12% 20%
25% 25%
18% 31% 23%
3 mths afterQ1 2013
3 mths afterQ2 2013
3 mths afterQ3 2013
3 mths afterQ4 2013
3 mths afterQ1 2014
3 mths afterQ2 2014
3 mths afterQ3 2014
3 mths afterQ4 2014
3 mths afterQ1 2015
41%
Very confident Fairly confident
30% 41% 46% 43% 46% 54% 40% 49%
86
From Q2 2013, increasing confidence amongst smaller potential applicants has driven the increase overall
Confidence 0-9 emps 10-249 emps
52% 39%
33% 43% 40%
30% 41% 41% 46% 43% 46%
54% 49%
52%
37% 32%
43% 40%
29%
40% 40% 45%
42% 45%
53% 49%
61% 60% 54% 55%
60% 60% 57%
63% 61% 67%
70% 65% 66%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Confidence amongst smaller potential applicants with 0-9 employees has been more volatile over time, but has
improved in recent quarters. Confidence amongst larger potential applicants is higher, and has been increasing
fairly steadily since the second half of 2012. Both are lower than actual success rates.
Time series: Confidence (very/fairly) bank will agree to facility next 3 months – by size
Q238
Base : All planning to apply for new/renewed facilities Q1 2015 592
87
Those with an average/worse than average rating have seen some improvement in confidence levels from Q2 2013
Confidence Min/low Avge / Worse
52% 39%
33% 43% 40%
30% 41% 41% 46% 43% 46%
54% 49%
65%
50% 51% 58%
70%
56%
64%
73% 67%
60%
77%
58%
71%
49%
37%
28%
43%
33% 27%
39% 40% 41% 41% 44%
54%
38%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Confidence amongst potential applicants with a minimal or low risk had recovered from a low of 50% in Q2
2012, but is not consistent over time, with an increase in Q1 2015 back to one of the higher levels seen.
Confidence amongst potential applicants with an average or worse than average risk rating has always been
somewhat lower, and lower confidence in Q1 2015 sees the gap between the two groups re-established
Time series: Confidence (very/fairly) bank will agree to facility next 3 months – by external risk rating
Q238
Base : All planning to apply for new/renewed facilities Q1 2015 592
88
The “confidence gap” for renewals has narrowed recently but remains below actual success rates
Success rate Confidence
92% 95% 97% 94% 95% 98% 98% 98% 94% 99% 96%
61%
48% 47% 50% 49%
38%
50% 56%
62% 54%
50%
62% 57%
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15
The chart shows actual success rates for loan and overdraft renewals in each quarter.
Confidence is measured amongst those planning a renewal borrowing event in the 3 months after
interview – this data has been aligned to the quarter when the event is due to occur (ie confidence for
Q1 2015 was collected in Q4 2014 from SMEs looking ahead to their future renewal)
Time series: Confidence (very/fairly) bank will agree to renewal v actual success rate
Q238
Base : All planning to apply for renewed facilities and all who renewed existing facility
31 47 50 44 46 60 48 42 32 45 Gap: 46
89
Confidence for new money improved during 2014, narrowing the gap (except in Q3 with a very high success rate)
Success rate Confidence
47% 52% 57% 36% 41% 56% 59% 66% 63% 81% 61%
43%
30% 25% 31% 29%
25% 29% 29% 32% 33%
45% 46%
36%
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15
Q238
Base : All planning to apply for new facilities and all who applied for new facility
4 22 32 5 12 31 30 37 31 Gap:
Time series: Confidence (very/fairly) bank will agree to new facilities v actual success rate
The chart shows actual success rates for loan and overdraft applications for new facilities in
each quarter.
Confidence is measured amongst those planning to apply for new facilities in the 3 months
after interview – this data has been aligned to the quarter when the event is due to occur (ie
confidence for Q1 2015 was collected in Q4 2014 from SMEs looking ahead to their future
renewal)
48 16
90
The economic climate remains the main barrier to future borrowing amongst ‘would-be seekers’ Time series: Main reason for not seeking borrowing – All future “Would be seekers” Q1 2015
Q239a
Base : Q1 15 All future “would be seekers” 514
In Q1 2015, 11% of SMEs were
“Future would-be seekers” (500,000).
What was their main barrier?
10% of Future would-be
seekers: 50,000 SMEs
Principle: prefer not to lose control, or
can get funds elsewhere: no longer
includes “prefer not to borrow”
16% of Future would-be
seekers: 80,000 SMEs
Process: think it’s too expensive, too
much hassle, needs security
Main reason for not applying
13% of Future would-be
seekers: 65,000 SMEs
Discouraged: had asked informally but
felt put off, or assumed would be turned
down
This remains more likely to be indirect
discouragement (12%) rather than being
put off directly by the bank (1%)
54% of Future would-be
seekers: 270,000 SMEs
Reluctant to borrow now: felt it was
not the right time to borrow / business
performance did not merit
37% said not right time in current
climate, 17% mentioned their own
performance
93
40%
23% 18%
15% 11%
Start up loans FLS Enterprise FinanceGuarantee Scheme
Business Growth Fund British Business Bank
Half of SMEs were aware of any of the five specific initiatives tested NEW QUESTION FORMAT Awareness of initiatives– Q1 2015 respondents only:
Q240bx
Base : All respondents Q1 2015
All SMEs
Before being prompted, 31% of SMEs said that they were aware of “any initiatives
from the Government and others to help make funding available to SMEs”. Once
prompted with the names of the 5 schemes below, 53% were aware of any of them.
Excluding the PNBs increases initial
awareness to 34% and awareness
after prompting to 58%
94
Larger SMEs remained somewhat more likely to be aware of the initiatives tested NEW QUESTION FORMAT Awareness of initiatives– Q1 respondents only:
Q240bx
Base : All SMEs Q1 1001/1679/1608/750
40%
22%
17%
14%
10%
40%
24%
20%
16%
12%
41%
32%
25%
24%
15%
44%
39%
29%
25%
16%
Start up loans
FLS
Enterprise Finance GuaranteeScheme
Business Growth Fund
British Business Bank
0 emps 1-9 emps 10-49 emps 50-249 emps
31% of SMEs said that they were
aware of “any initiatives from the
Government and others to help
make funding available to SMEs”.
This ranged by size from 30%
with 0 employees to 39% of those
with 10-49 employees
53% of SMEs were aware of any
of these 5 initiatives when
prompted:
• 53% if 0 emps
• 53% 1-9 emps
• 58% 10-49 emps
• 64% 50-249 emps
95
Awareness of crowd funding has improved since the start of 2014, to the highest level seen to date Time series: Awareness of crowd funding – excluding PNBs. Question structure revised for Q1 2014
18%
24% 24% 26%
17%
25%
32% 32%
38%
Q2+Q3 2012 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Q238a2
Base : All respondents excluding PNBs Q1 2015 3220
All SMEs excluding PNBs
33% 50-249 emps
40% 10-49 emps
39% 1-9 emps
38% 0 emps
Since the start of 2014, the proportion of SMEs (excluding PNBs) aware of crowd funding has
increased. The proportion of those aware who would consider applying for crowd funding was
37% for 2014 overall, and 32% in Q1 2015
96
69%
20%
10%
2%
All SMEs excluding PNBs
SMEs with employees were slightly more aware of ‘crowd funding’ but no more likely to consider it as a form of funding
Use/applied for
Would consider
Q238a2
Base : All respondents excluding PNBs YE Q1 2015 13463 2095/4459/4687/2222
12%
use/consider
Aware, would not consider
Not aware
Awareness & consideration of crowd funding – YE Q1 2015 excluding PNBs question structure revised for Q114
11% 12% 11% 8%
70% 65% 65% 66%
19% 23% 24% 26%
10% 10% 9% 6% 1% 2% 2% 2%
0 emp 1-9 emp 10-49 emp 50-249 emp
Excluding the PNBs, who appear unlikely to borrow, awareness of crowd funding was 31% for YEQ1
2015. SMEs with employees were slightly more likely to be aware of crowd funding but not necessarily
to consider using it. Use/consideration varied very little by age of business with the exception of those
trading for over 15 years where 8% use/would consider v 13% for Starts and other younger businesses
97
The “finance” conundrum – an overview
98
The finance “conundrum”
79% reported a profit – the highest
figure to date
Fewer injections of personal funds
(especially of “distress” injections)
An increasing proportion with a
minimal/low risk rating
The continuing decline of the economy
as a barrier (unless planning to apply)
Over the last few quarters we have seen a range of positive indicators for SMEs around growth, profitability etc.
This optimism had not translated into a clearly increased appetite for finance, despite increasing success rates
and improving confidence amongst those planning to apply.
Data for the latest quarter was gathered January – March 2015, ahead of the General Election campaign
proper, at a time when the most likely result seemed another coalition. There are still positive indicators:
Predicted growth has stabilised (at a relatively low level for the 0 employee businesses). Those planning to
grow are twice as likely to be planning to applying for finance (20% v 9%) and that is stable over time
Success rates are at the highest levels seen to date on the Monitor. However, there is still only limited evidence
of any increased appetite for finance, the proportion of PNBs continues to increase and many SMEs want to be
debt free if possible.
99
Excluding the PNBs shows use of and appetite for finance potentially starting to increase amongst the remaining SMEs
Time series: Past/ Anticipated borrowing profile– excluding PNBs
72%
66%
61%
66% 65% 68% 69% 68%
63% 64% 66%
68% 70%
35% 37%
34% 33% 29% 29%
26% 29% 28% 27%
30% 29%
35%
23% 21%
18% 22%
25% 21% 20%
25% 22% 23%
25% 24% 27%
Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
Use finance Borrowing event Plan to apply
Q229
Base : All respondents excl PNB
4022/3894/3732/3664/3649/3637/3585/3370/3514/3576/3153/3220
100
An analysis of when they applied shows a potential uplift in applications in recent quarters Time series from Q4 2013: when application for new/renewed/auto renewed facility made
25% 25%
20%
15%
10%
5%
Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15
OD Loan AR
Base : All respondents applying
Expected share
An equal distribution would see 15% of all
applications in this period being made in Q4 14 or
Q1 15:
• Overdrafts 17%
• Loans 18%
• Auto renewals 17%
101
The finance ‘conundrum’ – what other evidence can the SME Finance Monitor provide?
Over the last few quarters we have seen a range of positive indicators for SMEs around growth, profitability etc.
This optimism had not translated into clearly increased appetite for external finance, despite a low interest rate
environment and increasing success rates– why?
They don’t perceive a need
for finance?
Since H2 2011 between 10% and 12% of SMEs have identified a “need” for
(more) external finance. The proportion of SMEs using external finance has
declined steadily (notably core finance) while the proportion of PNBs has
increased steadily (now 48%)
They have cash/other
reserves?
95%+ of SMEs hold some credit balances, and an increasing proportion hold
£5k+ (38% in Q1 2015) – ranging from 27% of 0 emps to 85% of 50-249 emps.
33% have access to Trade Credit (increasing to 63% of 50-249 emps) and two
thirds with access say this reduces their need for external finance
They are still worried about
the future?
13% say the current economic climate is a major barrier, down from a peak of
37%. However, amongst those with any future appetite for finance, a quarter
cite the economy as a barrier and this has not dropped recently. Such SMEs
are more worried about all the barriers tested (including political uncertainty)
and potentially about their business
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The finance ‘conundrum’ – what other evidence can the SME Finance Monitor provide? (2)
It is unlikely that one of these is “the reason” in isolation – it is more likely to be a
combination of reasons, with varying degrees of importance for different types of SME
They believe the bank will
say no?
76% of applications are agreed, and success rates for new money (including
first time applicants) are improving. Meanwhile there is a confidence “gap”, with
49% of potential future applicants thinking the bank will agree to their request
and (indirect) discouragement remaining a key issue for would be seekers
They don’t like debt?
27% of SMEs are ‘debt averse’ while 36% would prefer to be debt free but
would use finance if it will help the business grow. The small group “ever”
turned down remain less likely to apply in future. As already mentioned, the
proportion of PNBs is increasing, overall and across size bands
They are looking at other
options?
Loans, overdrafts and credit cards remain the most common forms of lending
(but at lower levels over time). A stable minority of SMEs are aware of other
initiatives (EFGS/ BGF.) Awareness of crowd funding is increasing (currently
38% excl PNBs): 2% of SMEs are using and a further 10% would consider it
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Key findings
The positive indicators from SMEs are still present: more are making a profit, more
hold £5k+ of credit balances, the risk profile is improving, the economy is less of an
obstacle and fewer SMEs have felt that they ‘had’ to inject personal funds
Application success rates are at the highest levels recorded to date, due to more
success for new money generally, including FTAs. Access to finance is seen as less
of a barrier and confidence amongst those planning to apply that the bank would
agree to lend has improved, but is still below actual success rates
The PNBs make up an increasing proportion of all SMEs. If they are set aside, past
and future appetite for finance is starting to show some signs of improvement
amongst remaining SMEs, and recent quarters have seen a slightly higher share of
applications
This is not currently being translated into a clear increase in use of/appetite for
external finance. Fewer SMEs use external finance, 7 in 10 aim to pay down debt
and remain debt free and 8 in 10 were Happy non-seekers of finance. Appetite for
future finance is also stable overall
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For more information please feel free to contact the author of the report, Shiona Davies:
[email protected] or 0207 400 1000.
The next full report from the SME Finance Monitor, covering data up to the end of Q2 2015, will be
published in late August 2015.
Contact