SME Finance Monitor - BVA BDRC · 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

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:

http://www.sme-finance-monitor.co.uk/





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



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


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


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


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


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


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


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


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


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



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


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


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”


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


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



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


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


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


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


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



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


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


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


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


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”



Process: think it’s too expensive, too

much hassle, needs security

Main reason for not applying



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%)



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


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

102

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

103

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

mailto:[email protected]



Documents

SME Finance Monitor - BVA BDRC · 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