Are you a ‘happy non-seeker’ of external finance?

More business owners than ever are running their firms without applying for external sources of finance, according the latest edition of the SME Finance Monitor.

The report, based on over 5,000 interviews with small firms, shows that small businesses were far more upbeat about the economy at the end of 2013, but fewer than ever felt the need to seek finance from banks and other lenders.

What is a ‘happy non-seeker’ of finance?

A ‘happy non-seeker’ of funding is a firm which has not applied for finance over the previous year, and has not experienced any barriers to applying for lending during that period. 79% of respondents to the survey met this description during the final quarter of 2013, compared to 73% at the end of 2012.

However, where small businesses had applied for finance last year, there was a clear divide between the success rate of applicants, with larger, more established firms more likely to succeed than fledgling businesses with little trading history. This conclusion is, perhaps, unsurprising.

Other findings from the study

Some of the key findings from the study (published by BDRC Continental last week), include:

• The percentage of business owners who see the current economic climate as being an obstacle to their success has almost halved since the start of 2012.
• The number of business owners who injected personal savings into their enterprises fell significantly between the end of 2013 (15%) and last quarter of the previous year (24%).
• 70% of all applications for lending during the final quarter of 2013 were successful (this figure includes overdrafts as well as loans).
• 60% of first-time applicants for lending during 2013 were unsuccessful – a higher proportion than in 2012 (51%).
• Most small firms are unaware of the funding initiatives introduced by the Government (this trend was also highlighted in a recent Public Accounts Committee report). The most recognised scheme is Funding For Lending (FLS); 29% of SMEs have heard of it.
• The vast majority (77%) of small firms said that Government schemes are not relevant to them, as they are not seeking finance anyway.

Further Information

The SME Finance Monitor is run quarterly, and has used the results of over 55,000 interviews with small business owners over 11 successive quarters. You can access the full report here.