For more than two years EEF has been tracking credit conditions across manufacturing and that survey, together with the Bank of England's various reports on lending have provided a fairly solid picture of a financial sector struggling to recover post-crisis and a large segment of SMEs at the sharp end of higher costs and reduced availability.
Today BDRC Continental, a market research company commissioned by the Business Finance Taskforce, published the results from the first of its quarterly surveys of 5000 SMEs.
Some of the results will not comes as a surprise to anyone that's been tracking lending conditions - approval rates on overdrafts have been higher than loans over the past 12 months; smaller, younger companies have been facing a more challenging lending environment than older, larger SMEs and it's easier to renew existing facilities than have new ones approved.
However, the survey does shed a bit of light on some new areas.
Firstly, the proportion of 'unrequited' SMEs - that is companies that have had a need for external finance over the past year, or expect to in the next 12 months but have not approached a bank and have no plans to. The survey puts this group at 15% of SMEs in the last year. Some have been put off by current economic conditions. But many more have been put off by their perceptions of the process or have been discouraged by their lender following an informal approach.
Is 15% a lot? The survey only provides us with a snapshot in time. We don't know how widespread reluctance to seek external finance would be in more 'normal' circumstances. But the survey shows that half of those that had needed an overdraft and two thirds of those that wish they'd applied for a loan said that the decision not to apply has impacted on their business - suggesting the issue of discouraged ... or 'unrequited' demand is hardly a marginal one. This is a question it will be worth keeping an eye on in the coming quarters.
The second area of interest is the percentage of SMEs that have seriously considered changing banks in the past year. Around one in seven companies that have had a successful credit event in the past year have considered switching and this (not surprisingly) rises to over two in five for SMEs that have had unsuccessful credit applications. Despite this cases of SMEs switching banks remains relatively low - giving further weight to an argument we've made here numerous times before about insufficient competition in the sector.
All this leaves us with a bit more of the complex SME lending picture. But it doesn't reveal anything that - at this stage - changs our view on where more progress still needs to be made:
- Rebuilding sources of finance beyond bank debt
- Boost competition in the banking sector and
- improving real business understanding across the financial sector