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Higher confidence about bank lending could boost growth prospects of 270,000 companies

Higher confidence about bank lending could boost growth prospects of 270,000 companies

Increasing the numbers of businesses confident about their chances of getting bank lending would boost UK growth, new research from BDRC Continental shows. Hundreds of thousands of businesses could expand, order more equipment or boost their spending power if they were more aware of their good prospects of getting bank finance.

The BBA is today launching a new campaign to let businesses know they are a lot more likely to get bank finance than they think. It will highlight, in particular, that while only 37% of SMEs planning to apply for finance believe they will get approval from their bank, actual approval rates are a lot higher at almost 67%.

The research identified as many as 270,000 businesses that wanted to apply for finance but never actually ended up doing so. The research from the BDRC survey identifies a lack of confidence in their chances of success as one of the key reasons for this.

Increasing confidence amongst businesses around lending has the potential to boost the UK economy, as if all of those businesses went ahead and applied for finance this could enable:

- 53,000 small and medium sized businesses expand in the UK

- 48,000 new orders for equipment

- 113,000 businesses to boost their spending power

- 16,000 companies to develop new products or significantly improve their offering to customers

Launching the new campaign BBA Chief Executive Anthony Browne said:

“We’ve launched this campaign to let businesses know that they are a lot more likely to get finance than they think.

“This matters because more successful loan applications mean more orders for equipment, more new jobs and more plans to expand.

“Small businesses are the engine room of the economy and the research we publish today shows how much stronger our recovery could be if more SMEs approached their banks for finance”.

ENDS

The new campaign will be speaking to businesses with a turnover of less than £25million, and working alongside the government, politicians, banks and business groups to spread the message that SMEs are a lot more likely to get finance than they think.

The campaign, featuring online advertising and social media outreach, will provide top tips for finance success, promote schemes such as business mentoring and showcase examples of businesses that have gone on to grow and prosper after securing a loan.

The new Better Business Finance (BBF) website, a one-stop-shop resource for business of all sizes and of all sectors, includes impartial information and practical online tools for navigating finance options and helping businesses choose to borrow in a way that suits their needs and circumstances: www.betterbusinessfinance.co.uk

For more details please call the BBA press office on 0207 216 8989.

Notes to Editors

Businesses are a lot more likely to get finance than they think

There is an evident ‘perception gap’ between what businesses consider to be their chances of success in obtaining finance, and the reality. Many businesses assume that they will be turned down by their bank, when in fact statistics from the latest SME Finance Monitor report (Q3, 2013) show the following:

Success rates for all applications for finance (loans & overdrafts) were 67% and confidence over the same period that the bank would say yes was 37%

The BBA is launching this campaign to try to boost confidence amongst SMEs about approaching their bank to seek finance. If more businesses were as confident about their chances of getting a loan, then this could provide a real
boost to the economy.

Low confidence means many businesses who want finance don’t actually apply

Although the SME Finance Monitor shows that 14% of SMEs say that they are planning to apply for finance we can see from applications that only 8% actually go ahead and
approach banks and providers for new or renewed facilities.

This means that the equivalent of 6% – or a total of 270,000 SMEs – decide not to apply for finance despite identifying a business need for it. A lack of confidence in their chances of success has been identified as one of the key
reasons for this.

If those businesses all applied for finance that could create a significant boost to the UK economy

The reasons for future borrowing (more than one answer allowed) among all applying:

Working capital /cash flow: 62%

Support growth in the UK: 29%

Buy plant / machinery: 26%

Develop a new product/service: 9%

Buy/lease premises: 6%

Buy vehicles / trucks: 1%

(The un-weighted base is 2,518)

The survey shows that many of the businesses who are thinking about taking on borrowing are looking to do so in order to expand. So if all of those 270,000 businesses identified actually went on to take out borrowing, based on a 67% approval rating (source: the SME Finance Monitor Q3 2013 report), the following could happen:

Almost 53,000 small and medium sized businesses could expand in the UK

There could be nearly 48,000 new orders for equipment

Over 113,000 businesses could boost their spending power.

More than 16,000 companies could develop new products or significantly improve their offering to customers.

New campaign launches

In response, a number of high street banks – alongside the BBA – have launched a new national campaign through the BBF programme. This 12 month campaign aims to help and encourage SMEs to approach lenders for business loans on the basis that they are a lot more likely to get finance than they think.

It is supported by the BBA and the banks involved are Barclays, HSBC, Natwest, RBS, Lloyds and Santander.

The campaign will also raise awareness of the independent Appeals Process that has been in place since 2011 to allow businesses to challenge banks’ finance decisions. This
means if SMEs are initially declined for a loan, overdraft or credit card they can appeal to their lender to have their decision overturned. The overall process is being overseen by Independent reviewer, Professor Russel Griggs OBE.
SMEs turned down for bank finance can start their appeal at the BBF website or apply directly to their bank.

You can read more about the independent Appeals Process here.

Examples of campaign online advertising

Advertising images


Research

The new analysis uses SME Finance Monitor research based on 15,000 interviews of small and medium sized businesses conducted independently by BDRC-Continental between January and September 2013. It assesses the attitudes and experience of the whole spectrum of SME businesses, from sole proprietors to small employers, to businesses with 250 employees, in their use of the whole range of external finance options (not just bank finance). See attached note for more detail.

The full SME Finance Monitor is available at www.sme-finance-monitor.co.uk