Survey reveals SMEs are reluctant to borrow money with demand tumbling

Of the SMEs surveyed by BDRC Continental, 57 per cent had neither borrowed, nor intended to borrow money, whilst only 40 per cent said they took out some form of external finance between July and September, the lowest since the survey began.

Findings from the survey, commissioned by the Business Finance Taskforce, showed entrepreneurs increasingly felt applications to borrow money would be turned down by banks.

“SMEs seem to be moving away from external finance so we’ve got fewer SMEs currently using it, fewer that have applied in the past and fewer that are planning to apply,” Shiona Davies, director of BDRC Continental, said.

“Those who plan to apply are less confident that they will get it, and more SMEs, albeit a minority, now talk about being discouraged from applying at all.”

Of all the applications made, 71 per cent did result in a loan or overdraft being provided, with less than a quarter of applicants not receiving any form of funding, equivalent to 3 per cent of all the UK’s SMEs. But perceptions weighed heavily in the survey, with just a third believing that a bank would agree to their request for finance, the lowest ever level recorded by the quarterly survey.

The survey of more than 5,000 SMEs was conducted before news in October that Britain was no longer in recession.

The quarterly SME Financial Monitor also showed a year-on-year decrease in the use of ‘core products’, such as loans, overdrafts and credit cards.