During the depths of the credit crunch access to finance was consistently quoted as the number one barrier to growth. This concern led to a swath of initiatives to encourage banks to lend more, none of which can claim to be a huge success.
However, whilst the access to finance barrier remains steadfastly in place for some businesses, there is clear evidence that many SMEs have successfully overcome this hurdle and got a ‘yes’ from their bank.
Throughout the credit crunch an independent research group, the SME Finance Monitor team, have been engaging with up to 5,000 SMEs each quarter to find out about their experiences of dealing with banks.
The findings have been a fascinating insight in to what is really going on and the last report to the quarter-ended June 2015 reveals that more businesses than you may think are getting a ‘yes’ from their bank.
With an improving economy the myth that the majority of businesses are struggling to get finance is slowly being eroded.
In terms of a successful outcome to a finance request what does the latest SME Finance Report reveal?
For mature businesses which applied for a new or renewed loan and/or overdraft facility in the 18 months to June 2015 the team found that a staggering 79% ended up with a facility. Higher than you thought?
The success rate has steadily been climbing with the latest result moving up from 67% seen in the previous 18 months to quarter 4 2013.
What do the figures look like for loans or overdraft requests on a separate basis?
Of the businesses that applied for an overdraft facility 84% were successful compared to 69% for loan applications; you will be more successful if you apply for a short-term facility.
Let’s drill down further; what about businesses that applied for finance for the very first time? Perhaps not too surprisingly they struggled more than repeat borrowers in getting what they requested. The outcome for first-time applicants was that 58% were successful; more work to do here!
The one finding that always comes as a shock to some is exactly how many businesses actually want to borrow. The assumption is often that a large majority of businesses are in need of finance. Each quarter though the SME Finance Monitor team blows this view out of the water.
In the latest report, when asked whether they have borrowed in the last 5 years or plan to seek finance in the next 3 months, those SMEs who answered ‘no’ are termed as Permanent Non-Borrowers. The result was that 49% of SMEs fell into this category and this has steadily increased over time, up from 34% in 2011. That means that almost half of the SMEs questioned have no interest in borrowing!
When the question on appetite to borrow is focused on a shorter period the figure is even more surprising. On being asked if they have borrowed over the previous 12 months, those SMEs answering ‘no’ were classified as Happy Non Seekers and 80% fell into this category. I’m sure you’ll agree that this figure is higher than most people would assume.
The message here is twofold: don’t automatically assume you’re going to get a ‘no’ from your bank because the majority of your fellow business owners are getting what they need. And secondly don’t fall into the trap of thinking that all businesses want to borrow; many are perfectly happy where they are.
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.