Half of SMEs ‘permanent non-borrowers’

Many SMEs looking to pay down debt; but appetite for credit among remaining companies remains high.

Almost half (48%) of SMEs are now classified as “permanent non-borrowers” and are looking to operate without any further credit, according to a report by BDRC Continental.

The SME Finance Monitor investigates the availability of external finance for the UK’s small and medium-sized enterprises (SMEs). It suggests around 70% are aiming to pay down their current debt and remain debt-free in the future.

Around one-third (36%) of respondents said they would be prepared to borrow to help their business grow. However, 27% said they would not take on debt even for this purpose.

Among SMEs who are still active borrowers, borrowing intentions remain high – bolstered by high success rates for those applying for credit.

Three-quarters of applications for new or renewed loans and overdrafts in the past 18 months have been successful. This compares favourably with the 66% of successful applications in the previous 18-month period.

The report also looks at the awareness and uptake of government support schemes and alternative fundraising routes.

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It suggests that, when prompted, 53% of SMEs are aware of government or other finance support schemes. The best-known is the Funding for Lending Scheme (23%). Only 11% were aware of the British Business Bank.

More respondents than ever (38%) were aware of crowdfunding options. However, only 2% use it as a way to raise capital. Around two-thirds said they would not consider this for their business.

BDRC Continental director Shiona Davies said the research highlighted “some interesting differences between two clear groups of SMEs based on their attitude to finance.”

“One half now meet our definition of a Permanent non-Borrower and the growth in the size of this group has masked a recent increase in use of, and appetite for, finance amongst the other half of SMEs,” she said.

Rich Preece, UK VP and managing director at Intuit, commented that “banks certainly aren’t the be all and end all for SME owners wanting to get that all-important cash injection”.

“Peer-to-peer lending is fast becoming a popular method for SMEs to give their business a boost in cash. Recent data from the Peer-to-Peer Finance Association showed that P2P business lending grew by 250 percent in 2014 alone,” he said.

“Crowdfunding, is also growing in popularity among SMEs. Interestingly, the SME Finance Monitor revealed that 26 percent of the respondents are using personal funds for their business.”

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Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

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