Small Firms Not Borrowing As MuchSeptember 7, 2012
According to a survey conducted by the quarterly SME Finance Monitor, the UK’s small and medium-sized enterprises (SMEs) are showing “a growing reluctance” to borrow.
The Monitor shows that small businesses have cut back on borrowing in the past quarter. The survey found that only 43 percent of 5,000 SMEs surveyed in the second quarter used external finance such as bank loans, down from 50 per cent in the first three months of the year.
And among the reasons for the fall in borrowing is that more than one third of firms that would have liked a loan said they didn’t bother to apply because they assumed their application would be rejected.
Small businesses have been particularly hard hit as banks, facing higher capital requirements, rein in lending. Various government schemes aimed at improving the availability of financing have so far failed to boost the economy.
Commenting on the findings, EEF chief economist Lee Hopley said the survey highlighted concerns that investment by manufacturers could be hampered by a growing reluctance from SMEs to access external finance to support investment.
She added: “UK banks need to be doing all they can to encourage creditworthy firms back through their doors. They can start by delivering on their commitments, such as consistently offering the declined loans appeals process and signposting service. So far, awareness of these initiatives by relevant SMEs is running woefully low.”
However, the survey also found that 35 per cent of the firms cited the economic climate as the biggest barrier to running their businesses versus 11 per cent who considered access to finance as a major obstacle.
“There remains limited appetite for external finance, both looking back over the past year and forward to the next three months,” said Shiona Davies, director at BDRC Continental, which carried out the survey.This entry was posted in SME. Bookmark the permalink.