SME Finance Monitor - BVA BDRC€¦ · 2 The SME Finance Monitor Q3 2015 Over 90,000 SMEs have been interviewed since the survey started in Q2 2011 The report and supporting data

SME Finance

Monitor

Q3 2015

An independent report by

BDRC Continental, November 2015

2

The SME Finance Monitor Q3 2015

Over 90,000 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 September 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 Q3 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 2015, 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 20,067 interviews YE Q3 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 (Q2 2014 to Q3 2015)

4

Today‟s presentation

Context

Borrowing events in the last 12 months

Outcome of applications and renewals

The future

5

Context



The future

6

Most SMEs are profitable. A steady 1 in 3 use external finance

All SMEs – YEQ3 15

Q241 / risk rating / Q14 / 15

Base : YEQ3 15 All respondents 20,067, and 18,339 for risk ratings

8%

74%

36% 17%

10%

3% 30%

9%

61%

45%

6%

Minimal

Low

Average

Worse than

average

Profit

Broke even

Loss

DK

Use external finance now

In past but not now

Not in last 5 years

2 million SMEs (45%) have a worse

than average external risk rating

3.4 million SMEs (74%) made a

profit in the last trading year

1.6 million SMEs (36%) are using

external finance

7

Three quarters of the largest SMEs have a minimal/low risk rating, compared to 1 in 6 of the smallest SMEs Current external risk rating YEQ3 15

50%

34%

8% 6%

32%

27%

22% 17%

12%

28%

49%

42%

6% 11% 20%

35%

0 Emp 1-9 emp 10-49 emp 50-249 emp

45%

30%

17%

8%

All SMEs

External risk rating

Base : YEQ3 15 All respondents with a risk rating 18,339 3381/5824/6208/2926

Minimal Average Low Worse than average

8

The proportion of SMEs with a “Minimal” or “Low” risk rating has increased steadily since the start of 2013 Time series: Risk rating per quarter

Minimal Average Low Worse than average

55% 53% 55% 56% 54% 52% 47% 47% 45% 43% 44% 45% 48%

30% 32% 28% 29% 30% 31% 34% 30% 33% 33% 30% 31% 27%

13% 9% 10% 10% 10% 11% 13% 16% 15% 17% 18% 17% 17%

2% 5% 6% 5% 6% 7% 7% 7% 7% 8% 9% 7% 8%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

The overall risk rating profile is driven by 0 employee SMEs. They are the most likely to have a

worse than average external risk rating (55% in Q3 2015), but an increasing proportion have a

minimal or low rating – for 2015 to date, 18% had such a rating compared to 10% in 2012. For those

with employees the improvement has been from 31% to 46% over the same period

Risk rating

Base : All respondents with rating

4583/4545/4630/4535/4490/4528/4530/4607/4609/4584/4560/4594/4601

9

There is less variation by size of SME in terms of making any profit, but the amount made increases with size Profitability YEQ3 15

6% 7% 9% 9%

10% 9% 5% 5%

11% 9% 7% 6%

73% 76% 79% 80%

0 Emp 1-9 emp 10-49 emp 50-249 emp

6%

9%

10%

74%

All SMEs

Q241 Financial performance in last 12 month period

Base : YEQ3 15 All respondents 20,067 4003/6645/6417/3002

Profit

Broke even

Loss

DK

Once the DK answers are excluded, 79% of SMEs reported making a

profit. This varied relatively little by size compared to other variables: from

78% of those with 0 employees to 88% of those with 50-249 employees

Amongst those who made a profit, 28% made a profit of more than £25,000

(excluding DK). This varied by size from 20% of 0 employee SMEs to 90% of

those with 50-249 employees

10

The proportion of SMEs reporting making a profit has improved steadily over time

7% 9% 7% 8% 8% 6% 9% 6% 6% 7% 7% 5% 6%

17% 14% 15% 16% 15% 13% 10% 12% 12% 10% 10%

9% 9%

13% 13% 13% 13% 13% 11% 13% 11% 10% 11% 10%

10% 10%

62% 64% 64% 64% 65% 69% 69% 71% 73% 72% 74% 76% 75%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

Most SMEs are profitable (74% YEQ3). Once the „don‟t know‟ answers are removed, 80%

of remaining SMEs in Q3 2015 reported having made a profit and this proportion has

increased steadily over time, up from 69% in Q3 2013

Q241

Base : All respondents

5032/5000/5000/5000/5008/5028/5000/5008/5023/5024/5038/5001/5004

Profit Loss Broke even DK

Time series: Reported profitability in past 12 months, per quarter

11

SMEs with 10 or more employees are twice as likely to use external finance as the smallest SMEs Use of external finance – now and in past 5 years YEQ3 15

Use any external finance now In past but not now Not in last 5 years

66%

49%

37% 37%

3%

4%

4% 2%

32%

47%

59% 60%

0 Emp 1-9 emp 10-49 emp 50-249 emp

61%

3%

36%

All SMEs

Amongst SMEs with employees, 49% are using external finance. The larger the SME, the

more likely they are to be using external finance, and this is true for both core finance (loans,

overdrafts and credit cards) and for other forms of finance.

Q14/15 Has the business used any form of external finance in the past 5 years / which of the following forms does it currently use?


12

Use of external finance remained unchanged in 2015 at 36%, compared to 46% in 2011 Time series: Use of external finance per quarter

Use external finance now In past but not now Not in last 5 years

55% 54% 57% 54% 56% 57% 64%

58% 58% 62% 61% 60% 61%

5% 5% 4%

3% 3% 3%

3%

3% 3% 3% 3% 3% 4%

40% 41% 39% 43% 41% 40% 33%

39% 40% 36% 36% 36% 36%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

Q15

Base : All respondents 5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004

A third of SMEs are using external finance – either “core” loans,

overdrafts and credit cards (29% in Q3) and/or other forms of finance

including invoice discounting and leasing (16% in Q3)

13

51% 47%

41% 50%

43% 40% 41% 39% 43% 41% 40%

33% 39% 40%

36% 36% 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 Q2 15 Q3 15

Between 2012 and 2014 use of finance declined across all size bands, before stabilising in 2015 to date Time series: Use of external finance per quarter

Q15


5063/5055/5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5038/5001/5004

50-249 emps 10-49 emps

1-9 emps

0 emps

All SMEs

2011: 46% 2012: 44% 2013: 41% 2014: 37%

Overall use of external finance is driven by the behaviour of 0 employee SMEs. Their use

of external finance fell from 38% in 2012 to 32% in 2014 but has now stabilised. Amongst

those with employees use of external finance also fell, from 59% in 2012 to 51% in 2014 and

again this has been stable in 2015.

60%

59%

49%

31%

14

50%

43% 40% 41%

39% 43%

41% 40%

33%

39% 40% 36% 36% 36% 36%

40% 36%

34% 33% 32% 33% 33% 31%

27% 30% 31%

28% 29% 28% 29%

22% 18%

15% 15% 15%

21% 18% 17%

13%

18% 20%

16% 16% 17% 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 Q2 15 Q3 15

As overall, use of core finance has stabilised. Other forms of finance are typically used by around 1 in 6 SMEs Time series: Core and other financial products

Q15/14 and others


5000/5032/5000/5000/5000/5008/5028/5000/5008/5023/5024/5038/5001/5004

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 has remained at 20% for 2015 to date.

7% 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% 49%

46%

50%

43% 40% 41%

39%

43% 41%

40% 33%

39% 40%

36% 36% 36% 36%


In 2015, half of SMEs meet the definition of a Permanent non-borrower, while a third use external finance Time series: Permanent non-borrowers and users of external finance

Q15/14 and others


5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5001/5004

Use any

external

finance now

The „Permanent non-borrowers‟ are not using external finance and show no inclination to do so.

In 2012, 34% of SMEs were PNBs, increasing steadily to 43% for 2014 as a whole. There has been a

further increase in 2015 with 48% meeting the definition (Q1-3). Over the same time period, use of

external finance fell from 44% in 2012 to 37% in 2014 and 36% for 2015 to date

Permanent

non-

borrowers

16


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 has widened (from nothing in

2012 to 21 percentage points in 2015 to date)

52%

31%

17


Those with employees remain more likely to be using external finance than to 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 2015 to date

35%

50%

18

The group of SMEs neither using external finance nor a PNB has become somewhat smaller over time 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% 49% 46%

20% 23% 26% 22%

20% 21%

19% 19%

19%

22% 20% 17% 16% 15% 18%

50% 43% 40% 41% 39% 43% 41% 40%

33% 39% 40%

37% 36% 36% 36%


Q15

Base : All respondents 5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5001/5004

Recently, as the proportion of PNBs has increased, the “middle group” has

reduced in size (as the proportion using external finance has stabilised)

19

The “squeezed middle” remains a clear trend amongst the smallest SMEs Time series: Use of external finance per quarter – those with 0 employees


34% 39% 37% 40%

45% 40%

45% 46% 54%

42% 44% 51% 53% 53% 50%

21%

24% 28% 23% 22%

22% 20% 19%

20%

23% 21% 17% 15% 15% 19%

45% 37% 35% 37% 33%

38% 35% 35% 26%

35% 35% 32% 32% 32% 31%


Q15

Base : All respondents with 0 employees

Since Q1 2013 the proportion of 0 employee SMEs using external finance has been fairly stable.

As the proportion of PNBs increased, this reduced the middle group (who don‟t use finance but are

not PNBs) from a quarter to less than a fifth of 0 employee SMEs.

20

SMEs with employees are less likely to use external finance, with a similar proportion moving into the PNBs Time series: Use of external finance per quarter – those with employees


20% 23% 26% 28% 28% 25% 27% 29% 31% 31% 28% 38% 35% 36% 35%

15% 15%

18% 18% 18% 17% 14%

16% 17% 17%

18%

16% 15% 15% 15%

65% 62% 56% 54% 54% 58% 59% 55% 52% 52% 54%

46% 50% 49% 50%


Q15

Base : All respondents with employees

Amongst those with employees, a consistent 1 in 6 or so are in the middle

group – neither using external finance nor a PNB.

21

17%

16%

19%

48%

Half of SMEs are neither using trade credit, nor any of the other forms of finance specified, with variations by size NEW QUESTION SUMMARY : Use of trade credit and other forms of external finance YEQ3 2015

All SMEs

Q14/15/14y

Base :YEQ3 15 All respondents 20,067

17% use external finance and

use trade credit regularly

16% use trade credit regularly but

are not currently using external

finance

19% use external finance but are

not using trade credit regularly

48% are neither using external

finance nor trade credit

YE Q3 15, 33% of all SMEs use

Trade Credit from suppliers. This

varied by size – 28% of 0 employee

SMEs use Trade Credit compared to

60% with 10-249 employees

This varies by size of SME:

• 53% 0 emps

• 34% 1-9 emps

• 22% 10-49 emps

• 18% 50-249 emps

22

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 YEQ3 15

Q14y Does the business offer or receive Trade Credit?


54%

59%

41%

26%

26%

16%

15%

19%

16%

10%

13%

13%

13%

14%

15%

18%

13%

27%

44%

49%

All SMEs

0 Emp

1-9 emp

10-49 emp

50-249 emps

Offer only Receive only No Trade Credit Offer & receive Offer: Receive:

31% 34%

26% 28%

40% 46%

58% 60%

64% 59%

Receiving trade credit is much more likely to reduce the need for external finance (22%

of all SMEs), than offering trade credit is to increase the need for finance (7% of all SMEs)

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 YEQ3 15

Require less finance

Not sure

Do not require less finance

72%

54%

40% 40%

1%

2%

3% 4%

8%

14%

17% 18%

19% 31%

39% 38%

0 Emp 1-9 emps 10-49 emp 50-249 emp

67%

1% 10%

22%

All SMEs

Q14y3-5 Impact of Trade Credit?


No Trade Credit received

22% of all SMEs say that they need less external finance because they receive trade

credit from suppliers, increasing by size from 19% of those with 0 employees to 38% 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 YEQ3 15

Require more finance

Not sure

Do not require more finance

73%

60%

42% 36%

1%

1%

3% 5%

21%

28%

38% 41%

5% 11%

16% 18%

0 Emp 1-9 emps 10-49 emp 50-249 emp

69%

1%

23%

7%

All SMEs

Q14y3-5 Impact of Trade Credit?


No Trade Credit offered

7% of all SMEs say that they need more external finance because they offer trade credit

to customers, increasing by size from 5% of those with 0 employees to 18% 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.

25

Around a quarter of SMEs (typically the smaller ones) had received an injection of personal funds Injection of personal funds in past 12 months – YEQ3 15

Yes – chose to Yes – felt had to No personal funds injected

71% 74% 85%

92%

14% 12%

8% 3% 15% 14%

8% 5%

0 Emp 1-9 emp 10-49 emp 50-249 emp

72%

13%

14%

All SMEs

Q15d Has the business received an injection of personal funds from the owner/directors in the past 12 months?


1.2 million SMEs (27%)

had an injection of

personal funds in the

previous 12 months

26

16% 20%

16% 19% 20%

18%

18%

15% 15% 13% 14%

14%

13% 15%

25% 26% 24%

21% 22% 20%

15%

15% 15% 15% 15%

11%

13% 15%

41%

46%

40% 40% 42%

38%

33% 30% 30%

28% 29% 26% 26%

30%

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 Q3 15

Injections of personal funds declined from a peak of 46% in Q3 2012 and are now more stable at around 3 in 10 SMEs Time series: Injections of personal funds in previous 12 months

Q15d and others


5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004

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 and is currently 30% in Q3 2015. There has been a reduction in

those saying they “had” to inject funds (26% to 15%), with a smaller

reduction in those choosing to inject funds (20% to 15%) – and separately

fewer SMEs plan to inject funds in future

27

Including trade credit and personal injections increases net use of „business funding‟ from 36% to 63% for SMEs overall Use of business funding (net) YEQ3 15

Base : YEQ3 15 All respondents 20,067

36%

36%

36%

16%

16% 11%

External

finance

Trade

credit

Personal

funds

+

+

=

=

=

36%

52%

63%

Incremental effect of including different

types of funding, over

and above the types of

external finance detailed

in the Monitor

The uplift is more marked for smaller SMEs:

0 emps:

32% to 60%

1-9 emps:

47% to 72%

10-49 emps:

59% to 81%

50-249 emps:

60% to 79%

28

36%

16%

11%

All SMEs

Broadening the definition of “business funding” has most impact on the smaller SMEs Use of business funding (any) YEQ3 2015

Q15/14y/26d Base : YEQ3 15 All respondents 20,067 4003/6645/6417/3002

Personal funds

Trade credit

External finance

63% use business

funding

Including trade credit and personal injections of funds boosts the proportion of 0 employee

SMEs using “business funding” from 32% to 60%. The uplift is less marked for larger

SMEs who are more likely to be using a range of sources of external finance.

32%

47%

59% 60%

15%

19%

20% 18%

13%

6%

2%

0 Emp 1-9 emp 10-49 emp 50-249 emp

60% 72% 81% 79%

29

6% 4% 4% 5% 3%

63% 66% 64% 58% 56%

15% 14% 15% 17%

18%

12% 11% 12% 14% 16%

5% 5% 4% 6% 7%

Q2-4 2011 2012 2013 2014 Q1-3 2015

None <£5k £5-10k £10-50k £50k+

Most SMEs hold credit balances, and the proportion holding more than £10,000 is increasing over time Credit balances held – over time

Q244 Base : Q1-3 15 All respondents excl DK 10,091

17% 16% 20% 23% £10k+

Since 2012, the proportion of SMEs holding £10k+ in credit balances has increased overall (16% to

23%) and across size bands:

0 emps:

10% to 17%

1-9 emps:

32% to 41%

10-49 emps:

66% to 70%

50-249 emps:

77% to 82%

16%

30

26%

19%

42%

68%

82%

All SMEs

0 emps

1-9 emps

10-49 emps

50-249 emps

Hold £10k +

Most of those who hold £10k or more in credit balances say that this reduces their need for external finance NEW: Impact of credit balances on need for external finance Q3 2015

Q244 Base : Q3 15 excluding DK 3231 750/1182/887/412

In Q3 2015, a quarter of SMEs held more than £10,000 in credit balances, increasing by size

of business. A consistent 8 in 10 of these SMEs said that they had less need for external

finance as a result of the balances held, the equivalent of 15% of all SMEs.

The 8 in 10 figure does not vary by whether the SME is currently using external finance or not.

76%

79%

78%

79%

79%

Reduces need

for finance

31

20% 18% 18% 15% 14%

43% 41% 40%

32% 34%

52% 51% 52%

44% 43%

Q2-4 2011 2012 2013 2014 Q1-3 2015

Have OD Use Core finance Any external finance

An decreasing proportion of SMEs with £10k+ in credit balances are using any external finance Facilities used by those holding £10k+ in credit balances – over time

Q244 Base : Q1-3 15 All respondents holding 10k+ in credit balances 4897

Since 2012, the proportion of SMEs holding £10k+ in credit balances has increased from 16% to

23%, while within this group, use of external finance has declined from 51% to 43% and use of

overdrafts specifically from 18% to 14%.

32

54% 53% 53% 52% 45% 42% 39% 38% 37% 38% 43%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

The proportion of SMEs with some personal element to their business banking remains lower than in 2013 Time series: Personal element to banking per quarter

Q15

Base : All respondents 5000/5000/5008/5026/5000/5023/5038/5001/5004

50-249 emps

10-49 emps

1-9 emps

0 emps

All SMEs

The most common „personal‟ elements remain an injection of personal funds (30% in

Q3 2015) and/or using a personal account for business banking (20%). Both increased

somewhat in Q3 leading to the higher overall figure reported, albeit this remains lower than in

previous years – for 2013 as a whole 53% had a personal element to their banking

8%

17%

31%

48%

33

7% 8% 6% 5% 6% 8% 8% 9% 9% 9% 11% 9% 9% 9% 12%


Overall, the proportion of SMEs that export is stable over 2014 and 2015

Time series: Exporters

Q223

Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/5001/5004

All SMEs

29% 50-249 emps

19% 10-49 emps

15% 1-9 emps

10% 0 emps

The proportion of exporters has increased somewhat since 2012 when 6% of all SMEs

exported, compared to 10% in 2014 and also for YEQ3 2015.

This is due to more of the smaller SMEs exporting. Between 2012 and YEQ3 2015 the

proportion of 0 employee SMEs that exported increased from 5% to 8% and for 1-9 employee

SMEs from 9% to 13%. It was unchanged for those with 10-49 employees (21%) and slightly

lower for those with 50-249 employees (from 34% to 29%).

34

75% 77% 73% 67% 62%

10% 8% 11% 17%

19%

8% 7% 10% 11% 13%

7% 8% 5% 5% 6%

All exporters 0 emps 1-9 emps 10-49 emps 50-249 emps

<25% 25-50% 51-75% 76%+

YEQ3 2015, 15% of exporters made half or more of their sales abroad, down from 24% in 2013 Proportion of sales that are exported – YEQ3 2015

Q223a All exporters

Whilst the proportion of exporters has increased, the proportion of exporters who make more

than 50% of their sales overseas has reduced over time. In 2013, 24% of exporters reported

that half or more of sales were made abroad. By YEQ3 2015 that proportion has fallen to 15%

due mainly to fewer smaller exporters making high levels of sales overseas

15% 15% 15% 16% 19% 50%+

35

Exporters are more likely to have grown, innovated and to make higher profits than those who don‟t export Exporters v non-Exporters YEQ3 2015

46%

37%

49%

63%

80%

20%

46%

35%

49%

39%

33%

79%

21%

51%

Use external finance

Permanent non Borrower

Grown in last 12 months*

Innovated last 3 years

Made a profit**

Led by a woman

Owner under 50

Exporters Non Exporters

Base : YEQ3 2015 Exporters 2978 and non-Exporters 17,089

* Excluding Starts and DK **Excluding Dk answers

There was little difference in the

proportion making a profit. However

48% of profitable Exporters made more

than £25k profit compared to 26% of

profitable non-Exporters

36

.. And this is true whether they have employees or not

Exporters v non-Exporters YEQ3 2015

41%

41%

45%

61%

78%

31%

52%

36%

30%

78%

Use externalfinance

Permanent nonBorrower

Grown in last 12months*

Innovated last 3yrs

Made a profit**


Base : YEQ3 2015 Exporters 2978 and non-Exporters 17,089

* Excluding Starts and DK **Excluding Dk answers

Amongst 0 employee SMEs:




55%

31%

53%

66%

84%

48%

37%

46%

42%

82%

Use externalfinance

Permanent nonBorrower

Grown in last 12months*

Innovated last 3yrs

Made a profit**


Amongst SME with employees:




0 Emps Employers

37

74% 81% 75%

83% 73% 74%

4% 3%

6% 3%

2% 3%

21% 16% 19% 14%

25% 23%

All Exporters All nonExporters

All Exporters- 0 emps

All nonExporters - 0

emps

All Exporters- with emps

All nonExporters -with emps

Exporters are more likely to have had a borrowing “event” and to be successful with any overdraft applications made

Q115/209

Base : All respondents :0 emps 207/2795 and 1+ emps 2013/10,028

Borrowing profile in 12 months prior to interview – 2015 to date

Had any event Would be seekers Happy non-seekers

Q1-3 15

Exporters are more likely to have had a borrowing “event” and are less likely to have been

a Happy non-seeker of finance. This difference is almost entirely due to the 0 employee

SMEs who export. Future appetite for finance follows a similar pattern.

Further statistical analysis showed that Exporters who apply for a new/renewed overdraft

are more likely to be successful than their non-exporting peers (allowing for size, age of

business etc) but that there is no impact on loan application success rates

38

70% 77%

69% 79%

72% 74%

10%

11%

10%

12%

9% 10%

21% 11%

21% 10%

20% 16%

All Exporters All nonExporters

All Exporters- 0 emps

All nonExporters - 0

emps

All Exporters- with emps

All nonExporters -with emps

Exporters are more likely to be planning to apply for finance and this is primarily due to Exporters with no employees

Q115/209

Base : All respondents :0 emps 207/2795 and 1+ emps 2013/10,028

Anticipated borrowing profile for next 3 months – 2015 to date

Plan to apply Would be seekers Future Happy non-seekers

Q1-3 15

Exporters are more likely to be planning to apply for finance and are less likely to expect to

be a Happy non Seeker of finance. This difference is almost entirely due to the 0 employee

SMEs who export.

39

51% 47% 48% 46% 53%

45% 43% 42% 43% 49%

Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

Exporters are consistently more likely to be planning to grow, even once size has been taken into consideration

Time series: Growth aspirations

Q225

Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/5001

All SMEs

46% non exporters

plan to grow

69% exporters

plan to grow

Q3 2015

The uplift in growth aspirations for those who export v those who don‟t is 42% to 63% for all SMEs

YEQ3 2015 and more marked for SMEs with no employees:

0 emps:

39% to 62%

1-9 emps:

51% to 63%

10-49 emps:

61% to 74%

50-249 emps:

65% to 77%

40

24%

22%

6%

89%

86%

8%

New markets (net)

New market in UK

New market overseas

Existing market (net)

Existing market in UK

Existing market overseas

All planning to grow

Those planning to grow are much more likely to be planning to sell more into existing markets than into new ones Where growth will come from – all planning to grow YEQ3 2015

Base : YEQ3 2015 10,477

Excluding Dk answers

12% of all SMEs planning to grow

say they will do so through sales

overseas, whether in a new or

existing market

= 5% of all SMEs

44% of all Exporters planning to

grow say they will do so through

sales overseas, whether in a new

or existing market

= 28% of all Exporters

= 3% of all SMEs

6% of all non-Exporters planning to



or existing market

= 2% of all non-Exporters

= 2% of all SMEs

41

43%

36%

23%

87%

79%

39%

21%

20%

4%

89%

88%

3%

New markets (net)

New market in UK

New market overseas

Existing market (net)

Existing market in UK

Existing market overseas


Very few of those not currently exporting plan to grow through sales overseas (6% v 44% of Exporters) Where growth will come from – all planning to grow YEQ3 2015

Base : YEQ3 2015 10,477

Excluding Dk answers

44% of all Exporters planning to



or existing market

= 28% of all Exporters

= 3% of all SMEs

6% of all non-Exporters planning to



or existing market

= 2% of all non-Exporters

= 2% of all SMEs

42

Context



The future

43

Larger SMEs are more likely to be prepared to borrow to help the business grow Attitudes to finance– YEQ3 15

Q238a5

Base : All SMEs YEQ3 15 20,067

34%

34%

41%

11%

Agree Agree strongly

75%

44%

Aim to pay down debt

and remain debt free

Happy to use external

finance to help

business grow

0 emps:

74%

1-9 emps:

75%

10-49 emps:

74%

50-249 emps:

72%

0 emps:

43%

1-9 emps:

51%

10-49 emps:

57%

50-249 emps:

59%

44

39% 44% 44% 45% 48%

Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15

There has a slight increase in the proportion of SMEs prepared to borrow to grow, including the smallest SMEs Time series: Attitudes to finance

69% 73% 74% 75% 76%

Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15

Base : All respondents 5008/5023/5038/5001/5004

All SMEs

76% No emps

76% Emps

46% No emps

53% Emps

Agree: Aim to pay down

debt and remain debt free

Agree: Happy to use

external finance to help

business grow

45

39%

3% 27%

31%

4 in 10 SMEs agree that whilst prefer to be debt free would also be happy to use finance to help business grow SUMMARY Attitudes to finance– YEQ3 15

All SMEs

Q238a5

Base :All SMEs YEQ3 15 20,067

39% of SMEs aim to be debt

free but would be happy to use

external finance to help the

business grow. This has

increased over time (32% Q3

2014 to 40% Q3 2015)

3% are not looking to be

debt free and would be happy

to use external finance to

help the business grow

31% gave some other

combination of predominantly

“neutral” answers

27% aim to be debt free

and would not be happy to

use external finance to help

the business grow

– the „debt averse‟

Larger SMEs are slightly more likely to be prepared to use external finance to

grow even though they have a preference for being debt free (44% for those

with employees v 38% of those with 0 employees)

46

New for Q3 2015, 8 in 10 SMEs say their plans are based entirely on what they can fund themselves Attitudes to finance–Q3 15 only

Q238a5

Base : All SMEs Q3 15 5004 * statement previously asked about an interest rate increase of 2%

34%

37%

20%

41%

31%

41%

11%

11%

39%

11%

Agree Agree strongly

75%

48%

31% If our cost of borrowing increased by 2% we would

struggle*

Aim to pay down debt and remain debt free

Happy to use external finance to help business grow

80% NEW: Our current plans for the business are based

entirely on what we can afford to fund ourselves

42%

NEW: If our bank were unable to help us with the

finance we needed, we would be happy for them to

pass on our request to an alternative lender

47

Those with a potential appetite for finance are more willing to have their details passed on Attitudes to finance–Q3 15 only

Q238a5

Base : All SMEs Q3 15 5004

41%

31%

39%

11%

80% NEW: Our current plans for the business are based

entirely on what we can afford to fund ourselves

42%

NEW: If our bank were unable to help us with the

finance we needed, we would be happy for them to

pass on our request to an alternative lender

Affordability: Smaller SMEs are more likely to agree with this statement (82% with 0 employees)

than larger ones (65% with 50-249 employees). No difference by risk rating, age of business, growth

plans or whether they are currently using external finance or a PNB

Alternative lender: No difference by size band, risk rating or age of business. Those currently using

external finance were more likely to agree (54%) than those not using it (36%), with a similar lower

score for PNBs (33%). 45% of those planning to grow agreed with the statement

48

Larger SMEs are less likely to base their plans solely on what they can fund themselves Attitudes to finance– Q3 2015 only – new and old questions

Q238a5

Base : All SMEs 5004

76%

82%

66%

77%

78%

62%

72%

71%

56%

73%

65%

51%

Aim to pay down debt and remain debt free

Our current plans for the business are basedentirely on what we can afford to fund

ourselves

Agree with BOTH statements

0 emps 1-9 emps 10-49 emps 50-249 emps

49

94%

2% 4%

All SMEs

A small minority of SMEs have ever been declined, but if they have, it has made them more reluctant to seek finance Impact of previous financial decline YEQ3 2015

6% of SMEs said that they had been declined for bank funding in the past. Amongst

those who have, around three quarters said it had made them more reluctant to seek

finance subsequently – the equivalent of 4% of all SMEs.

Q240X Thinking more broadly, has the business ever had either an application for a loan or overdraft, or a

more informal request for flexibility on a facility, turned down by your bank? And has this previous decline made you more

reluctant to apply for bank finance? Base : YEQ3 15 All respondents 20,067 4003/6645/6417/3002

Declined - more reluctant

Declined - Not more reluctant

Not declined

6% ever declined

94% 94% 95% 97%

2% 2% 2% 2% 4% 4% 3% 1%

0 Emp 1-9 emp 10-49 emp 50-249 emp

6% 6% 5% 3%

50

33%

1%

2% 2%

62%

6 in 10 SMEs have never been declined and are not using external finance at the moment Use of external finance YEQ3 2015 by previous events:

All SMEs

Q240xy

Base :All SMEs YEQ3 2015 20,067

33% of SMEs have never been

declined and are using external

finance

2% have been made more

reluctant by a decline but are

using external finance

1% were declined but are not

more reluctant and are using

external finance

62% have never been

declined and are not using

external finance

2% have been made more

reluctant by a decline and are

not using external finance

51

16%

81%

3%

8 out of 10 SMEs said they had had no wish, or need, to apply for loan/overdraft funding in the previous 12 months Borrowing profile in last 12 months YEQ3 2015:

All SMEs

Q25/26/115/209

Base : YEQ3 2015 All respondents 20,067

16% had a borrowing event,

typically applying for new or renewed

facilities, or an automatic renewal of

facilities

81% did not apply and did not

feel anything had stopped them,

the “happy non-seekers”

3% wanted to apply but didn‟t:

The “would-be seekers”

52

67% 73% 76% 76% 78% 79% 82% 78% 77%

82% 79% 82% 80%

11% 7%

7% 6% 7% 4%

4% 5% 5%

3% 3%

2% 3%

22% 21% 17% 19% 15% 17% 14% 17% 18% 15% 18% 16% 16%

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

Yr to Q215

Yr to Q315

Most SMEs are „Happy non-seekers‟ of finance. A declining minority wanted to apply but felt something stopped them

Q115/209


5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/5038/5001/5004

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 81% for YEQ3 2015. Over the same time period, the proportion reporting a borrowing

event has declined from 1 in 4 to 1 in 6 SMEs and the proportion of would be seekers

continues to fall

53

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%

7% 8%

4% 3% 3%

4% 3% 3% 3% 3% 3% 3%

5%

3% 4%

3% 3% 2%

1% 1% 2% 2% 2%

1% 2% 2% 2%

3%

1%

3% 2% 2%

12% 12% 10%

9% 8% 8%

7% 8%

6% 7% 7%

6%

8% 8% 7%


Q26

Base : All respondents 5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004

Interviewed in:

Type 2 Type 1 Type 3 Auto renewal

In Q3 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 (7%). These figures have changed very little since the start of 2013, but

remain at lower levels than were seen in 2011-12.

54

0 employee SMEs remained less likely to have had a borrowing „event‟ in the 12 months prior to interview Borrowing profile – Had an “event” YEQ3 2015

All SMEs “Had event” – by size (new definition)

14%

23% 25%

17%

0 emp 1-9 emp 10-49 emp 50 -249 emp

16%

ALL SMEs

81%

16%

3%

0 employee SMEs remain less likely to have had a borrowing

„event‟ than those with employees (14% compared to 23% of

those with employees)

Q115/209 now includes automatic overdraft renewals

Base YEQ3 15 All respondents 20,067 4003/6645/6417/3002

55

81%

ALL SMEs

8 out of 10 SMEs had not sought finance, or wanted to

Borrowing profile – Happy non seekers YEQ3 2015

All SMEs “Happy non seekers” – by size (new definition)

83% 74% 73%

82%

0 emp 1-9 emp 10-49 emp 50 - 249 emp

81% 3%

16%

The proportion of Happy non-seekers has increased over time, from 68% for 2012 to 81% for YEQ2 2015

as a whole. Those with employees are somewhat less

likely to have been a Happy non-seeker (74%)



56

81%

16%

3%

3%

ALL SMEs

3% of SMEs had wanted to apply for loan/overdraft facilities in the previous 12 months but hadn‟t Borrowing profile – Would be seekers YEQ3 2015

All SMEs “Would-be seekers” – by size (new definition)

SMEs with fewer than 10 employees are more

likely to be “would be seekers”, and the

proportion is declining over time



3% 3% 2%

1%

0 emp 1-9 emp 10-49 emp 50-249 emp

57

“Discouragement” and the “Process” of borrowing remain the key barriers to applications for loans or overdrafts

Q116a/210a

Base : YEQ3 15 All “would be seekers” 350/244

Main reason for not seeking borrowing – All “Would be seekers” YEQ3 2015

3% of SMEs were “Would be seekers” of finance

Main reason for not applying:

Discouraged: had asked

informally but felt put off, or assumed

would be turned down

Process: think it‟s too expensive,

too much hassle, needs security

Principle: prefer not to lose control,

or can get funds elsewhere: no longer

includes “prefer not to borrow”

Climate: felt it was not the right time

to borrow in the current economic

climate

2% 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?

34%

35%

18%

6%

41%

31%

16%

4%

(23% indirect v

11% direct)

(31% indirect v

10% direct)

58

Context



The future

59

6% 4% 7% 8% 4% 6% 8% 7% 2% 5% 1% 5%

26% 21%

30% 33% 23% 23% 14% 18%

10% 17%

17% 18%

17% 17% 13% 15% 11% 16% 16% 11% 18% 9% 13% 16%

51% 58% 51% 43%

62% 56% 63% 64%

70%

69% 69% 61%

80% of applications made in the last 18 months were successful, with higher success rates from 2014 Time series: Outcome by application date – ALL applicants / renewals (loans and overdrafts)

Q64/66/81/92/97

Base : All interviews to Q2 2013 All respondents who have had response from bank

From Q4 13: 589/537/582/582/443/479/369/217 INTERIM DATA

78% 77% 68%

Applied:

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%

80% of applications made in the last 18 months (Q2 2014 to Q3 2015) were successful. This has

been increasing over time – 68% were successful for the 18 months to Q4 2013

Q114

75%

Q214

88%

Q314 Q414

82%

Q115 Q215

60

85%

92% 95% 97% 94% 96% 98% 98% 98%

90% 100% 98% 100% 100%

54%

47% 52%

57%

36% 41%

56% 59%

66% 65%

81%

70%

64% 60%

Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414* Q115* Q215*

Almost all renewals are successful. Applications for new money were more likely to have been successful in 2014 Time series: Outcome by application date – ALL renewed v new money (loans and overdrafts)

Base : All applicants

Renewals: 255/200/ 233/180/92 INTERIM DATA New money 305/219/ 223/170/112 INTERIM DATA

Applied in:

% 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 (74% in 18 months to Q3 2015) than FTAs (62%)

but success rates for both have improved since 2013

61

4% 1% 4% 4% 2% 1% 4%

21% 15% 16% 17% 8% 9%

19% 11% 11%

3% 7% 5%

74% 82% 78% 78% 90% 89% 79%

79% 89%

95% 93% 95%

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: 255/200/ 223/180/92 INTERIM DATA

Renewals, by application date

100% 95% 97%


Q312 Q412

94%

Q113

95%

Q213

98%

Q313

98%

Q413

98%

97% of renewal applications made in the last 18 months (Q2 2014 to Q3 2015)

were successful. This has changed relatively little over time – 96% were successful

for the 18 months to Q4 2013

Q114

90%

Q214

100%

Q314 Q414

98%

Q115

100%

Q215

62

8% 7% 9% 10% 7% 9% 13% 8% 3% 9% 2% 9%

40% 37%

54% 49% 38% 32% 21% 26%

16% 21% 34%

31%

15% 19% 10% 17% 13% 19% 13% 10%

23% 11% 11%

24%

37% 38%

26% 24%

43% 40% 53% 55%

58%

59% 53% 36%

Applications for new money were more likely to be successful in 2014 Time series: Outcome over time – all applications made in each quarter (loan or overdraft)

All respondents who have had response from bank New money 305/219/ 232/170/112 INTERIM DATA

New money, by application date

60% 52% 57% 36% 41%


Q312 Q412

56%

Q113

59%

Q213

66%

Q313

65%

Q413

81%

70% of new money applications made in the last 18 months (Q2 2014 to Q3

2015) were successful. This has been increasing over time – 49% were

successful for the 18 months to Q4 2013

Q114 Q214 Q314 Q414

70% 64%

Q115 Q215

63

24%

6%

14%

56%

All applications for new funds

Success rates for first time applicants remain lower, but have improved over recent quarters Outcome of all applications applied for Q2 2014 to Q3 2015 (loan and overdraft)

Offered what wanted and took it

Have facility after issues

Took other funding instead

No facility

70% total 62% 74%

32%

19%

5%

6%

10%

16%

52% 58%

1st ever facility Other new money

Q64/66/81/92/97

Base : All applicants Q2 2014 to Q3 2015 who have had response from bank

1093 314/779

First time applicants are less likely to be successful than other applicants for new

money. However, the 18 months to Q3 2015 has seen a further increase in success rates

for FTAs (62% from 39% for the 18 months to Q4 2013) and a smaller increase over time

for other new money applicants (74% from 69%)

64

Across the most recent 18 month period, nearly 9 in 10 of those who applied now have an overdraft. Result of overdraft applications applied for Q2 2014 to Q3 2015

Q64/66/81/92/97

Base : All applicants Q2 2014 to Q3 2015 who have had response from bank 1404


Have overdraft after issues


No overdraft

74%

12%

3%

11%

85% 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 Q2 2014 to Q3 2015

The current success rate (86%)

continues the trend for

increasing success rates for

overdrafts (it was 74% for the

18 months to Q4 2013)

65

Since the start of 2014, more than 8 in 10 overdraft applications have been successful Time series: Outcome by application date – ALL overdraft applicants / renewals

2% 5% 4% 5% 4% 5% 7% 4% 1% 4% 1% 6%

22% 19% 30% 21%

15% 21%

8% 12% 11% 8% 17% 13%

17% 15% 13% 20% 9% 10% 17% 13% 15% 9% 9% 11%

60% 61% 53%

54% 72% 64% 68% 71% 73% 80% 73% 70%

Q64/66/81/92/97

Base : All applicants interviewed to Q1 2015 All respondents who have had response from bank

From Q1 2014: 356/367/285/311/233/146 SMALL BASE interim data

81%

Applied:


Q312

66%

Q412

77% 76%

Q113 Q213

74% 81%

Q313

74%

Q413 Q114

85% 84%

Q214 Q314

88%

Q414

89% 82%

Q115 Q215

66

The model predicts improving overdraft success rates which have been bettered in 2014 but not, thus far, in 2015

Time series: Outcome by application date – overdrafts compared to predictive model

Q64/66/81/92/97

Base : All applicants interviewed to Q2 2015 All respondents who have had response from bank

From Q1 2014: 356/367/285/311/233/146 SMALL BASE interim data

Applied in:

71% 71% 77% 76%

66%

74% 81%

74%

85% 84% 88% 89%

82% 81%

71% 74%

78%

74%

79% 78%

82%

78%

82% 82% 81% 78%

81% 84%

Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414* Q115* Q215*

% 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 are currently above those predicted by the model,

unlike those for 2015 to date

67

16% 7% 5% 4%

3%

3% 1% 0%

12%

9% 8%

7%

69%

81% 85% 89%

0 emp 1-9 emp 10-49 emp 50-249 emp

12%

3%

11%

74%

All applicants

85% total 81% 90% 93% 96%




No overdraft

Q64/66/81/92/97

Base : All applicants Q2 2014 to Q3 2015 who have had response from bank 1404 134/513/568/189

Larger applicants remained more likely to be offered what they wanted. Success rates improved for smaller applicants Outcome of overdraft – all applications/renewals applied for Q2 2014 to Q3 2015

86% of overdraft applications made in the last 18 months (Q2 2014 to Q3 2015) were

successful, up from 74% in the 18 months to Q4 2013. This is primarily due to

increased success rates amongst applicants with 0 employees (68% to 81%) and

those with 1-9 employees (79% to 90%).

68

12%

3%

11%

74%

All overdraftapplicants/renewals

Applicants with poorer external risk ratings have seen a more marked improvement in their success rates Outcome of overdraft – all applications/renewals applied for Q2 2014 to Q3 2015

85% total 97% 94% 91% 80%



Q64/66/81/92/97Base : All applicants Q2 2014 to Q3 2015 who have had response from bank 1404 190/494/339/281


No overdraft 2% 2%

8% 17%

4% 1%

3%

5%

15% 10%

13%

92%

79% 81%

67%

Min Low Avge Worse thanavge

Compared to the 18 months to Q4 2013, there has been some increase in success

rates for each risk rating but notably those with an average risk rating (83% to 91%) and

worse than average risk rating (59% to 80%)

69

FTAs for overdrafts are less likely to be successful, but their success rate has improved over time




No overdraft

Q64/66/81/92/97

Base : All applicants Q2 2014 to Q3 2015 who have had response from bank 1404 142/162/880

85% total 68% 74% 100%

Outcome of overdraft – all applications/renewals applied for Q2 2014 to Q3 2015

12%

3%

11%

74%

All overdraftapplicants/renewals

29%

8% 0%

3%

18%

12% 13%

7%

56% 61%

93%

1st ever overdraft Increasedoverdraft

Renew at samelevel

Success rates for first time applicants continued to improve (from 34%

for the 18 months to Q4 2013 to 68% for the current period). Renewals

remained the most likely to be successful.

70

24%

6%

15%

55%

Across the most recent 18 month period, 7 in 10 of those who applied now have a loan.

Base : All applications made Q214 to Q315 who have had response from bank 779

Result of loan applications applied for Q2 2014 to Q3 2015 Offered what wanted and took it

Have loan after issues


No loan

70% 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 Q2 2014 to Q3 2015.

The current success rate of 70%

continues the steady improvement

seen over recent quarters (58% of

loan applicants were successful in the

18 months to Q4 2013)

71

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

4% 13%

3% 11% 11% 3% 8% 9% 12% 1% 8% 1%

35% 34%

25%

31%

52%

36% 24% 26% 27%

8%

37%

19%

17% 18% 22% 12% 9% 15%

26% 12% 7%

24% 9%

20%

44% 35%

50%

46%

27%

46% 42%

52% 54%

64%

46%

61%


From Q1 2014 181/215/158/168/136 SMALL BASE interim data

61%

Applied: Q212


Q312

58%

Q412

53% 72%

Q113 Q213

36%

Q313 Q413

61% 68%

Q114 Q214

64% 61%

Q314 Q414

88% 55% 81%

Q115

72

The model predicts a gradual improvement in loan success rates - actual results have been more variable Time series: Outcome by application date – loans compared to predictive model


From Q1 2014 181/215/158/168/136 SMALL BASE interim data

Applied in:

60% 61% 53%

72%

58%

36%

61% 68% 64% 61%

88%

55%

81%

55%

61% 57%

63% 66%

61% 64% 63%

66% 67% 68% 66% 68%

Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314* Q414* Q115*

% have loan facility % predicted to have facility

The model for loan success rates explains less of the variance in success rates than

the model for overdraft success rates. This is reflected in the differences between

actual and predicted success rates with some quarters (Q2 2013 and Q3 2014)

reporting quite different success rates to those predicted.

73

Getting a loan or overdraft is typically a low effort experience, unless the facility was granted „after issues‟ Time taken to put agreed Type 1 funding in place – All applying Q214-Q315 and asked question

68%

41%

17%

21%

8%

13%

4%

14%

3% 11%

Q101a/b/c and Q196a/b/c

Base : All successful Type 1 overdraft and loan applicants Q214-Q315 1204/638

96% of successful overdraft applicants and 86% of

successful loan applicants said funds were made

available in good time (Q2 14-Q3 15) Those waiting

more than a month were less likely to agree.

All successful overdraft

applicants / renewals

All successful loan

applicants / renewals

2 weeks

3-4 weeks

1-2 months

3 months or not

yet in place

Within 1 week

72% of successful Type 1

overdraft applicants asked the

question described the process

as „low effort‟. 12% described it

has „high effort‟

57% of the equivalent loan

applicants described the

process as „low effort‟. 22%

described it has „high effort‟

Those who had their facility

„after issues‟ were less likely to

say this was „low effort‟

(overdraft 32%, loan 30%)

Those „offered what they

wanted‟ were more likely to say

this was „low effort‟ (overdraft

79%, loan 64%)

74

Context



The future

75

Half of SMEs (48%) said they plan to grow, in line with Q3 2014. More plan to grow by 20%+ after wording change Growth objectives for next 12 months – Q3 2015 respondents:

24%

24%

43%

4%

4%

Grow by 20%+*

Grow by up to 20%*

Stay same size

Become smaller

Sell / pass on

Plan to grow

(over time)

Q3 2013 47%

Q4 2013 48%

Q1 2014 45%

Q2 2014 53%

Q3 2014 46%

Q4 2014 43%

Q1 2015 43%

Q2 2015 43%

Q3 2015 48%

Q225 Growth plans in next 12 months

Base : All SMEs Q3 5004

* In Q3 2015 the question was changed from “Grow significantly” to

“Grow by 20%+” and “Grow moderately” to “Grow by up to 20%”. The

net growth score had changed very little, but 24% plan to grow by

20%+ compared to 6% planning to grow „significantly‟ in Q2 2015 .

76

47% 47% 47% 44% 48% 51%

47% 48% 45% 53%

46% 43% 43% 43% 48%


The increase in Q3 in the proportion of SMEs planning to grow is led by those with 0 employees Time series: Have plans to grow – wording change in Q3 2015

Q15


5055/5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5038/5001/5004

50-249 emps

10-49 emps

1-9 emps

0 emps

All SMEs

The change to the wording appears to have made the smallest businesses (with 0-9 employees) in

particular more likely to say that they plan to grow by 20% or more than they were to say they planned

to grow “significantly”. This will be monitored over future waves but the net “plan to grow” figure is in

line with other waves

64%

61%

54%

46%

77

14% 13% 18% 24% 33% 33% 30%

41% 49% 55%

All SMEs 0 emps 1-9 emps 10-49 emps 50-249 emps

New product/service Improved business

37% of SMEs have been innovative, primarily due to improving an aspect of the business (33%) Time series: Innovative SMEs (last 3 years) Q1-3 2015

Q223


37%

In 2012, 40% of SMEs were innovative (17% a new product or service, 35% improving a business

process). Since then, levels of innovation have fallen slightly, to 37% for 2015 to date, notably

amongst larger SMEs (seen across both new products/services and improved processes):

Across all size bands, those who have innovated were more likely to plan to grow, to be using

external finance, and to have applied for/plan to apply for finance and less likely to be a PNB

33% 44% 53% 61%

0 emps:

36% to 33%

1-9 emps:

49% to 44%

10-49 emps:

60% to 53%

50-249 emps:

70% to 61%

78

The economic climate and legislation/regulation are the main barriers to the future running of the business Main barriers to running business in next 12 months – Q3 respondents only:

Excl PNBs

8-10

8%

9%

7%

17%

15%

12%

Q227 Barriers to running business as would want in next 12 months

Base : All SMEs Q3 5004 Excluding pnb 3258

* Revised code Q3 14 ** New code Q3 2014

50%

60%

60%

67%

79%

75%

74%

76%

36%

25%

26%

21%

13%

16%

18%

14%

13%

13%

10%

9%

7%

6%

6%

6%

The current economic climate

Legislation & regulation

Political uncertainty/future govt policy**

Cash flow / late payment

NEW:Management/leadership skills

Access to external finance

Availability of relevant advice

Recruiting and retaining staff*

1-4 limited obstacle 5-7 moderate obstacle 8-10 major obstacle

13%

7%

79

“The current economic climate” is a declining barrier. Two thirds do not see any of these as major barriers in 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% 13%

14% 14% 13% 12% 14% 14% 14%

11% 12% 12% 12% 11% 12% 11% 13% 14% 14% 14%

11% 12% 11% 11% 10% 8%

10% 9% 8% 8% 9% 9% 11% 11%

13%

10% 12%

10% 10% 8% 7% 8% 7% 6% 6% 5% 6% 5% 6% 6% 6% 7% 6% 6% 6% 5% 6% 5% 6%

4% 4% 6%


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 5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004

The proportion saying none of these are major barriers has increased from half in 2012 (52%) to

two thirds in Q3 2015 (64%) despite adding extra factors (political uncertainty 10% and

management/leadership skills 7%). Those who did not identify any of these as major issues did

not consistently identify any other barriers when asked

80

33% 27%

17% 13%

36%

24% 16% 13%

10% 13% 12% 12% 19% 17% 15% 17%

Q312 Q313 Q314 Q315 Q312 Q313 Q314 Q315

The economy stopped being the top barrier for SMEs with employees in 2014

Time series: % Rating „The economic climate‟ and „Legislation and regulation‟ a major obstacle for next 12 months

Q227a

Base : All

Economic climate Legislation/regulation

31%

20%

11% 10%

28%

14% 11% 10% 19% 16% 14% 15% 14% 13% 10% 11%

Q312 Q313 Q314 Q315 Q312 Q313 Q314 Q315

0 emps 1-9 emps

10-49 emps 50-249 emps

81

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 (Q3 2015)

20%

14%

14%

15%

8%

13%

8%

8%

11%

12%

9%

7%

6%

3%

5%

5%

The current economic climate

Legislation & regulation

Political uncertainty

Cash flow / late payment

Management/leadership skills

Access to external finance

Availability of relevant advice

Recruiting & retaining staff

Q227a Barriers to running business as would want in next 12

months

Base : Q3 All SMEs 1221/3783

Plan to borrow/FWBS Future HNS

68% of Future happy non-seekers did

not rate any of these as major

obstacles, compared to 51% of those

with any appetite for future borrowing

82

11% 11% 13%

10% 12%

10% 10% 8% 7% 8% 7% 6% 6% 5% 6%

15% 16% 18%

14%

18% 15% 16%

12% 11% 12% 11% 10% 10% 8% 9%

22% 24%

26%

21%

27% 24% 25%

18% 16% 17% 17%

13%

18%

13% 13%


Access to finance has become less of a barrier overall, including amongst those with an interest in applying

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

5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004

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 13% in Q3 2015. These SMEs are also more

likely to rate all the other barriers tested as „major obstacles‟

83

22% 20% 23% 17% 14% 16% 19%

14% 17% 19% 15%

7% 6% 7% 6% 6% 7% 5% 5% 5% 7% 7%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

43% 42% 38%

27% 29% 22% 23%

19% 25%

21% 20% 26% 21% 20% 18% 16% 14% 13% 12% 9% 12% 11%

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q215 Q315

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

5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004

All HNS

Time series: % Rating „Cash flow/late payment ‟ a major obstacle for next 12 months

84

76%

11% 12%

Looking ahead, three quarters of SMEs in Q3 expect to be “happy non-seekers” of external finance Likely to apply / renew in next 3 months – Q3 2015 respondents only

12% future “would-be

seekers” in total

76% Happy non seekers - Unlikely to apply/renew in

next 3 months and happy with that decision

12% Likely to apply / renew in

next 3 months

11% “Would be seeker” – no

immediate need identified (but

foresee barriers if a need

emerged)

1% “Would be seeker” –

with identified need (that

unlikely to apply for)

Q229

Base : Q3 15 All respondents 5004

60% of SMEs neither

use external finance nor

plan to apply for any

(was 50% in 2011)

85

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% 79% 76%

23% 19% 22% 19% 16% 17% 15% 16% 15%

17% 14% 11% 10%

10% 11%

2% 3% 3% 2% 3% 2% 2% 1% 1% 1% 2%

1% 1% 1% 16% 14% 12% 14% 15% 14% 12% 15% 12% 14% 15% 13% 14% 11% 12%


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 5023/5000/5032/5000/5000/5000/5008/5028/5000/5023/5024/5038/5001/5004

86

Excluding the PNBs results in an increased appetite for finance but, with fewer WBS, over half are HNS of finance Time series: Anticipated borrowing profile for next 3 months – excluding PNBs

Have plans to apply/renew Would be seekers - with need Would be seekers – no need Happy non-seekers

42% 45% 44% 44% 44% 48% 50% 45% 46% 47% 48%

53% 53% 58% 55%

32% 29% 33% 29% 27% 27% 26%

28% 29% 28% 24% 21% 18%

20% 20%

3% 5% 4%

4% 5% 3% 4%

2% 3% 1% 3% 2%

3%

1% 2%

23% 21% 18% 22% 25% 21% 20% 25% 22% 23% 25% 24% 27% 21% 23%


Excluding the PNBs who appear unlikely to seek finance, reduces the proportion of

happy non-seekers to around half of remaining SMEs. As overall, there has been something

of a decline in future “would-be seekers” and few have an immediate need identified Q229

Base : All respondents excl PNB

3894/3732/3664/3649/3637/3585/3370/3514/3576/3153/3220/3195/3258

87

13% 12% 12%

11% 11%

21% 20%

19% 20%

16%

23%

21%

17% 18%

19%

21%

19%

16%

14% 14%

2011 2012 2013 2014 Q1-3 15

Appetite for finance has been fairly flat overall but more variable for those with employees Time series: Have plans to apply / renew in next 3 months, by size of SME

Q229

Base : All respondents 20,055 in 2014, 15,043 in 2015 to date

Across 2011-2014 appetite for finance dropped slightly from 15% to 13% overall

(and now 12% in Q1-3 2015). Those with employees were more likely to report a

lower appetite for finance in 2015


88

9% 12% 12% 11% 10% 10% 8% 9% 10% 7% 8% 7% 8%

10%

13% 13% 12%

10%

13%

9%

13% 12%

11% 12%

9% 11%

25% 24% 24%

22% 22%

18% 16%

17%

21%

14% 16%

15%

19%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

For 0 employee SMEs an injection of personal funds remains most likely than a future application

Time series: Finance plans – 0 employees

Q229

Base : o employees Q3 1000

For 0 employee SMEs, planning to inject personal funds was typically less likely in 2014-15

than in previous years but remains more likely than planning to apply/renew finance (which

is stable over time). A minority have a need for finance, and this has been somewhat less

likely since the start of 2014

Plan to apply/renew

Have need for more finance

Plan to inject personal funds

89

16% 15% 17% 15% 14% 14% 14% 12% 14% 11% 12% 9% 11%

18% 18% 19%

18% 18% 20%

19% 18%

23%

19% 18%

16% 16%

21%

17% 19%

18% 17%

15% 14% 14%

17%

13% 15% 15%

15%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

1-9 employee SMEs have become less likely to have a need for finance or to be planning to apply Time series: Finance plans – 1-9 employees

Q229

Base : 1-9 employees Q3 1651

Since mid-2014, those with 1-9 employees have been less likely to plan to apply for

finance and the gap to injections of personal funds has narrowed. Their perceived need for

finance remains lower than in 2012-13

Plan to apply/renew



90

14% 15% 15% 11% 12% 13% 13% 10% 13% 11% 13% 9% 11%

19% 19% 20%

15% 16%

18% 20%

15%

23%

16%

20% 19%

17%

11% 10%

8% 7%

8% 8% 7%

5%

8% 7%

9% 7%

8%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

Appetite for finance amongst SMEs with 10-49 employees has been broadly stable with no clear pattern over time Time series: Finance plans – 10-49 employees

Q229


Need for finance amongst those with 10-49 employees remains somewhat lower now than

in 2012. Plans to apply for/renew external finance as been volatile, but are slightly higher

overall than in 2013. Plans to inject personal funds remain limited

Plan to apply/renew



91

15% 13% 12% 10% 12% 12% 7% 7% 10% 10% 10% 9% 6%

18% 17%

19%

16% 14% 14%

11% 13%

17% 15%

14% 15%

12%

6% 5%

6% 6%

3% 4%

2% 4%

5% 5% 5% 6%

3%

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

For 50-249 employee SMEs need and appetite for finance is now lower than in 2013 Time series: Finance plans – 50-249 employees

Q229


Between Q1 2013 and Q1 2014, appetite for finance fell from 19% to 11% amongst those

with 50-249 employees. The proportion planning to apply then increased somewhat, but

that increase has not been sustained in Q3. The proportion with a need for finance is also

somewhat lower than in previous years

Plan to apply/renew



92

14%

16%

12% 13%

11%

16% 17%

13% 14%

16%

13% 13% 13% 12%

13%

15% 15% 14% 14%

11%

2011 2012 2013 2014 Q1-3 15

Compared to 2013 and 2014, there is more variability in appetite for finance by risk rating in 2015 to date Time series: Have plans to apply / renew in next 3 months

Min Low Avg. Worse / avg.

Q229

Base : All respondents Q1-3 2015 2468/4741/3321/3225

Appetite for finance has varied less over time for those with an average

risk rating

93

6 in 10 potential applicants are confident that their bank will agree to a future lending request

Q238

Base : All planning to apply for new/renewed facilities 713/547/607/610/574/538/699/526/592/494/522

Levels of confidence remain below the actual success rates (but the gap is

narrowing). In the last 18 months success rates for renewals have been 97%

compared to current confidence levels of 72%, and for new facilities success rates are

70% against a confidence level of 54%

Time series: Confidence bank will agree to facility next 3 months

29% 21% 21% 18%

28% 23% 26% 24%

32%

12% 20%

25% 25%

18% 31% 23% 25%

28%

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

3 mths afterQ2 2015

3 mths afterQ3 2015

41%

Very confident Fairly confident

60% 41% 46% 43% 46% 54% 49% 49%

94

The increase in confidence in Q3 is driven by the smaller potential applicants

Confidence 0-9 emps 10-249 emps

52% 39% 33% 43% 40% 30% 41% 41% 46% 43% 46% 54% 49% 49% 60%

52%

37% 32%

43% 40%

29%

40% 40% 45%

42% 45%

53% 49% 48%

60% 61% 60%

54% 55% 60% 60%

57%

63% 61%

67% 70%

65% 66%

77%

66%


Confidence amongst smaller potential applicants with 0-9 employees has been more

volatile over time, but has increased steadily since Q2 2013. Larger potential

applicants remain more likely to be confident of success albeit the higher level of

confidence reported in Q2 2015 was not maintained in Q3

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 Q3 2015 261/261

95

52% 39% 33% 43% 40% 30% 41% 41% 46% 43% 46% 54% 49% 49% 60%

65%

50% 51% 58%

70%

56%

64%

73%

67%

60%

77%

58%

71%

63% 67%

49%

37%

28%

43%

33%

27%

39% 40% 41% 41%

44%

54%

38%

45%

55%


Those with an average/worse than average rating have seen some improvement in confidence levels from Q2 2013

Confidence Min/low Avge / Worse

Confidence amongst potential applicants with a minimal or low risk had recovered from a low

of 50% in Q2 2012, but is fairly volatile over time. Confidence amongst potential applicants

with an average or worse than average risk rating has always been somewhat lower, but has

improved in 2015

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 Q3 2015 227/250

96

The “perception gap” for renewals has narrowed recently as confidence improves but remains below actual success rates

Success rate Confidence

85% 92% 95% 97% 94% 95% 98% 98% 98% 90% 100% 98% 100% 100%

57% 61%

48% 47%

50% 49%

38%

50% 56%

62% 54%

50%

62% 57% 57%

72%

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 Q2 15 Q3 15 Q4 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

97

54% 47% 52% 57% 36% 41% 56% 59% 66% 65% 81% 70% 64% 60%

34%

43%

30% 25%

31% 29% 25%

29% 29% 32% 33%

45% 46%

36% 35%

54%

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 Q2 15 Q3 15 Q4 15

Improvements in confidence have narrowed the gap for new money, as success rates fall slightly from the Q314 “peak”

Success rate Confidence

Q238

Base : All planning to apply for new facilities and all who applied for new facility

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)

98

The economic climate remains the main barrier to future borrowing amongst „would-be seekers‟

Q239a

Base : Q3 15 All future “would be seekers” 445

Main reason for not seeking borrowing – All future “Would be seekers” Q3 2015

12% of SMEs were future “Would be seekers” of finance

Main reason for not applying:

Discouraged: had asked

informally but felt put off, or assumed

would be turned down

Process: think it‟s too expensive,

too much hassle, needs security

Principle: prefer not to lose control,

or can get funds elsewhere: no longer

includes “prefer not to borrow”

Reluctance: felt it was not the

right time to borrow in the current

economic climate

What was their main barrier?

18%

17%

3%

58%

(18% indirect v

<1% direct)

(36% not right time, 22%

company performance)

99

54%

49% 49% 50%

63% 60% 60%

72%

64%

58%

53%

61%

54% 55% 58%

14% 14% 16%

12%

6% 4%

1% 2% 3% 4% 5% 5%

10%

7% 3%

14% 14% 12%

15% 13% 13% 13% 12%

15% 15% 15% 13%

16% 18%

17%

11% 14%

16% 17%

12%

16% 16%

11% 14% 15%

13%

9%

13%

9%

18%


„Reluctance to borrow now‟ remains the key barrier but there are more mentions of “process” and discouragement Time series: Main reason for not seeking borrowing amongst future “would-be seekers”

Q239a “Principle of borrowing” no longer includes “prefer not to borrow”

Base : All “would be seekers” 867/861/691/822/765/876/580/544/514/455/445

More of those “reluctant to borrow now” cite the current economic climate rather than their own

performance specifically. Almost all of those who are discouraged say that this is “indirect”

discouragement, where the SME has assumed they will be turned down and so has not applied. The

increase in the process score is due to more mentions of the „hassle‟ and „expense‟ of borrowing.

Reluctant to

borrow now

Process

Discouraged

Principle

100

A reluctance to borrow remains the key reason for those with no immediate need identified Time series: Main reason for not seeking borrowing amongst future “would-be seekers”

Q239a “Principle of borrowing” no longer includes “prefer not to borrow”

Base : All “would be seekers” Q2-3 60*/840

Principle of borrowing

Process of borrowing

Reluctant to borrow

Discouraged

58% 58% 59% 57% 59%

13% 10% 9% 9% 12% 5% 5% 7% 8% 5%

14% 14% 15% 17% 17%

Q2-3 14 Q3-4 14 Q4-1 15 Q1-2 15 Q2-3 15

Those with no specific need identified (11% of SMEs):

30% 38%

42%

30% 26% 23% 26% 28% 29%

43%

6% 6% 11% 14%

10%

25% 20%

9% 10% 15%

Q2-3 14 Q3-4 14 Q4-1 15 Q1-2 15 Q2-3 15

Those with a specific need identified (1% of SMEs):

101

40%

26% 19%

16% 12%

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 (after prompting) Awareness of initiatives– Q3 2015 respondents only:

Q240bx

Base : All respondents Q3 2015 5004

All SMEs

Before being prompted, 30% 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, 54% were aware of any of them.

Excluding the PNBs increases initial

awareness to 32% and awareness

after prompting to 55%

102

Larger SMEs remained somewhat more likely to be aware of most of the initiatives tested Awareness of initiatives– Q3 respondents only:

Q240bx

Base : All SMEs Q3 1000/1651/1602/751

40%

25%

17%

16%

11%

41%

30%

22%

18%

14%

40%

30%

24%

23%

16%

42%

36%

27%

26%

18%

Start up loans

FLS

Enterprise Finance GuaranteeScheme

Business Growth Fund

British Business Bank


30% 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 29%

with 0 employees to 37% of those

with 10-249 employees

54% of SMEs were aware of any

of these 5 initiatives when

prompted:

• 53% if 0 emps

• 56% 1-9 emps

• 57% 10-49 emps

• 60% 50-249 emps

103

18% 24% 24% 26%

17% 25%

32% 32% 38% 36% 37%

Q2+Q32012

Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015

Awareness of crowd funding has stabilised at around 1 in 3 SMEs (excluding PNBs) Time series: Awareness of crowd funding – excluding PNBs. Question structure revised for Q1 2014

Q238a2

Base : All respondents excluding PNBs Q3 2015 3258

50-249 emps

10-49 emps

1-9 emps

0 emps

All SMEs

Excl PNBs

A third of SMEs (excluding the PNBs) are aware of crowd funding. 0 employee SMEs are

slightly less likely to have heard of this form of funding, otherwise there remains little

variation by size of SME in Q3 2015

41%

40%

38% 37%

104

64%

24%

11%

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 Q3 2015 12,826 1902/4230/4546/2148

13%

use/consider

Aware, would not consider

Not aware

Awareness & consideration of crowd funding – YE Q3 2015 excluding PNBs question structure revised for Q114

12% 12% 12% 9%

65% 62% 61% 62%

23% 25% 28% 29%

11% 10% 10% 7% 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 36% for

YEQ3 2015. SMEs with employees were slightly more likely to be aware of crowd funding but not

necessarily to consider using it. Whilst awareness is increasing, the proportion aware of crowd funding

who would consider using it is not increasing over time (29% YEQ315 v 32% in 2014)

105

How might crowd funding impact on overall use of external finance?

1% of all SMEs are currently using crowd funding/peer to

peer lending

• Two thirds of them are currently using “external finance” (as

defined for the Monitor) as well

• So including crowd funding would add 0.3% to the current

measure of 36% of SMEs using any external finance

7% of all SMEs would consider using crowd funding/peer

to peer lending in future

• Just over half of them are currently “external finance” (as

defined for the Monitor) as well

• So crowd funding might add 3% to the proportion of SMEs

using any external finance, if they all took up this kind of

finance

106

Conclusions

107

Exclude the PNBs and the increase in financial activity and appetite seen to early 2015 has not quite been maintained

Time series: Past/ Anticipated borrowing profile– excluding PNBs

72%

66%

61%

66% 65% 68% 69% 68%

63% 64% 66%

68% 70% 71%

66%

35% 37%

34% 33% 29% 29%

26% 29% 28% 27%

30% 29%

35% 32%

30%

23% 21%

18% 22%

25% 21% 20%

25% 22% 23%

25% 24% 27%

21% 23%


Use finance Borrowing event Plan to apply

Q229

Base : All respondents excl PNB

4022/3894/3732/3664/3649/3637/3585/3370/3514/3576/3153/3220/3195/3258

Use of finance has varied since 2012 from 65-68% and is currently 69% for 2015 to date. Borrowing events are

higher in 2015 to date (32%) then in either 2013 or 2014 (both 28%) but not quite at 2012 levels (35%).

Potential appetite for finance has improved very slightly over time (21% in 2012 to 24% in 2015 to date)

108

An analysis of when they applied shows more applications in the first half of 2015 but Q3 currently in line with expectation Time series from Q4 2013: when application for new/renewed/auto renewed facility made

17% 17% 17% 17% 13%

10% 7%

3%

Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15

OD Loan AR

Base : All respondents applying

Expected share

An equal distribution would see 20% of all

applications in this period being made in 2015

• Auto renewals 28%

• Overdrafts 24%

• Loans 20%

109

Key findings

The positive indicators from SMEs are still present: more are making a profit, more

hold £5k+ of credit balances, the economy is no more of an obstacle than regulation

and half are planning to grow

Application success rates are at the highest levels recorded to date, with

improvements for SMEs such as FTAs that in the past have found it harder to

access finance. Access to finance is less of a barrier and confidence of success

amongst those planning to apply has improved, narrowing the „perception gap‟

The proportions of SMEs using external finance, and meeting the definition of PNBs

have been stable for a year now. Many SMEs still have growth aspirations so how

is this being funded?

Demand for finance, which showed some signs of improvement (excluding the

PNBs) appears to have stabilised. The proportion of “Would-be seekers” of finance,

who have been put off applying, is limited and lower than in previous waves.

110

Demand is limited and fewer SMEs feel they are “would-be seekers” of finance. What might explain this?

Are SMEs cutting their cloth according to their means?

In a new question, 80% of SMEs in Q3 2015 agreed that their current plans were based on

what they could fund themselves (a majority view in each size band)

There continues to be a strong preference for paying down debt and then remaining debt free

(75% in Q3) albeit 39% go on to say that they would still use finance to help the business grow

Using Trade Credit?

The equivalent of 23% of all SMEs in Q3 said that the

Trade Credit they could access reduced their need for

external finance

Using credit balances?

The equivalent of 15% of all SMEs in Q3 said that

holding £10k or more in credit balances reduced their

need for external finance

Choosing to inject personal funds?

15% of all SMEs in Q3 said that they had chosen to

inject personal funds into the business to help it develop

and grow

44% of all SMEs did at least one

of these:

• 53% if have employees

• 55% if currently using finance

• 52% if planning to grow

Documents

SME Finance Monitor - BVA BDRC€¦ · 2 The SME Finance Monitor Q3 2015 Over 90,000 SMEs have been interviewed since the survey started in Q2 2011 The report and supporting data