Positive outlook for SMEs, less so for finance providers

New research suggests that SMEs are feeling confident but a shift towards alternative finance may be cause for concern for banking sector

SMEs are in a positive frame of mind with more than three quarters now in profit and more than two thirds intending to pay off their debts in the near future, new research has found.

Today, research firm BDRC Continental released its quarterly SME Finance Monitor which showed that 77% of SMEs were now profitable, up from 69% in the same quarter last year. SMEs that saw the economic climate as a major barrier fell significantly, from 37% to just 16%.

The comprehensive study has surveyed over 70,000 businesses since 2010 and is one of the most accurate litmus tests of the economic climate amongst SMEs.

The survey also revealed that an increasing number of businesses are now relying on alternative forms of finance, despite access to traditional forms of credit becoming easier. For example, 32% of SMEs said that they were using trade credit, minimising the need for external finance.

“For over a year now, SMEs have been in a more positive mood, but this has not translated into increased appetite for external finance,” commented Shiona Davies, Director at BDRC Continental. “Two thirds of SMEs are aiming to pay down any existing debt and then remain debt free, and one fifth say that using Trade Credit reduces their need for external finance.”

The results seem to be sending a ripple of concern across the banking sector. A spokesperson for the BBA was keen to emphasise the changing lending climate.

 “Although most firms are happy with their current arrangements, more of those seeking funding are having their applications approved and reporting that the process was fast and hassle free,” the BBA said on the back of the report.

“This year nearly 8 in 10 have had a “yes” from their finance provider. Almost half of all SMEs say they have plans to grow. So, there really has never been a better time to approach a bank to see how they might help. You’re more likely than you think to get finance.”


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