Commenting on the findings of the SME Finance Monitor published today, George Nikolaidis, Senior Economist at EFF, the manufacturers’ organisation, says:
“Despite improving business performance indicators and application success rates, there is a still a long way to go before SMEs re-engage with the banking sector. The report findings are the latest addition to the familiar picture seen in the SME access to finance landscape over the past few years, where steady progress in supply dynamics and increasingly healthy corporate financials have failed to spur an increase in demand for external finance.
“What’s particularly striking is that almost three quarters of SMEs are willing to accept a lower growth rate rather than borrow to grow faster. We should not be complacent about this lingering reluctance among SMEs to access bank debt. It could mean that business are not getting all the ammunition they need to invest and realise their full growth potential.”
- Only 36% of SMEs reported using external finance in the year ending Q2 2016, stable from 2014 and 2015 but significantly lower than in previous years.
- Almost three quarters of SMEs (71%) are looking to repay any existing finance and remain debt free, while the same proportion are willing to accept a lower growth rate rather than borrowing to grow faster.
- This is despite application success rates increasing to 81% in the 18 months to Q2 2016 from 69% in Q4 2012 and 80% of SMEs reporting making a profit in Q2 2016.
- Moreover, four in ten (40%) SMEs reported growth in Q2 2016 and 41% plan to grow their business over the next 12 months.
- A separate EEF report on “Manufacturers attitudes towards external finance” released in August shows that 61% of manufacturers are less likely to use external finance than two years ago and that 53% of manufacturers would postpone or cancel investment if they cannot fund it internally.