Mixed results where business finance is concerned

Several recent reports that consider the SME business finance market have thrown up a mixed bag of results, suggesting the environment is still less than favourable for seeking additional funding.

The reports and surveys run by venture capital firm Albion Ventures and YouGov (on behalf of Simply Business) turned up an array of different messages both positive and negative. The results showed:

  • The overall number of business finance applications for SME’s dropped 17% in the last 12 months but success rates were up around 9% – with approximately 80% of those applying receiving a positive outcome.
  • The proportion of SMEs seeking credit or investment to fund working capital fell from 32% to 24%
  • 27% of firms raised finance to develop their business over the last year and 23% took out loans to expand their premises
  • The percentage of SME borrowing done through bank loans and overdrafts fell from 76% to 62%
  • Alternative finance sources such as equity investments from venture capitalist and angel investors (6%) are still far less popular than traditional bank loans.

The YouGov poll which focussed more on cash positions rather than lending found:

– 3 in 10 SMEs have £500 or less
– 20% have no reserves at all
– 16% of businesses do not know how much cash they have in reserve
– 17% don’t know how much their fixed monthly costs are

Tony Jadzevics, Director at Evans Weir commented on the reports saying “Some of what we hear in the news is still rhetoric but we are aware that some businesses are enjoying more success when applying for sources of business finance. We assume this to be as a result of conditioning to the new environment with businesses understanding they will have to work harder for less”. On the matter of cash flow and reserves he added “Cash is the proverbial King, its rule 101 of business and something we regularly remind our clients of. These stats are worrying, especially when taken against a backdrop of continued lending pressure”.

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