Seven out of ten SMEs are cutting down on borrowing » SMEInsider

Seven out of ten SMEs are cutting down on borrowing

Many small businesses have become very circumspect and disillusioned by banks after recent scandals, which has affected their tendency to borrow from high street lenders, according to a new report.

The report, carried out by BDCR Continental’s  SME Finance Monitor, found that in the first economic quarter of 2015, almost half (48 per cent) of SMEs were defined as ‘permanent non-borrowers’, meaning they had no plans to borrow at all. Legislators are worried that this reticent behaviour may arrest economic growth in the UK.

“With the uncertainty caused by the General Election now over, it will be fascinating to see whether that appetite for loans and overdrafts or indeed other forms of finance continues to grow amongst SMEs,” said Shiona Davies, a director of BDRC Continental.

However, despite this disillusionment, SMEs on the whole remain positive about the future. Nearly three-quarters (72 per cent) have actually said that, rather than borrowing more,  they want to pay off their debt and aim to be completely debt free.  Close to half (43 per cent) of SMEs said they planned to grow in the next 12 months.

The news is also good for the SMEs who may seek financing. In the past 18 months the success of rates of those applying for financing has improved with 76 per cent of all loan and draft applications resulted in businesses being accepted.