Are bank loans for SMEs easier than businesses think?
Earlier this year, the London Stock Exchange published the ‘1,000 Companies to Inspire Britain’ report. Based on DueDil’s data, it picked out some of the most exciting companies in the country that were on a positive growth trajectory.
But what is the situation for other businesses? And in particular, how are they finding the issue of finance?
To find out more, we conducted an exploratory survey of 1,370 businesses using our database. We found that although many small businesses find it hard to obtain finance, the perception is that it is much harder than it really is.
The survey found that 18% of SMEs who were yet to apply for a bank loan expected the process to be ‘very difficult’ with a further 35% expecting it to be at least ‘somewhat difficult’. By contrast, of those that had actually applied for a bank loan, just 9% said it was ‘very difficult’, 24% said it was ‘somewhat difficult’ and nearly one in five (18%) actually said it was ‘very easy’.
However, that doesn’t mean issues about SME finance are not without merit. Banks could still do well with improving the application process. For those that had been successful, 43% said that they would be ‘very likely’ to reapply if the process of applying for finance was easier.
In addition, the survey found that of those businesses that had been turned down for a bank loan, 14% had changed their primary business bank, with a further 59% considering doing so. Had they been accepted, 80% said they would have considered other financial products from their bank.
The report also estimates that a funding gap of up to £38bn existed in 2014 based on figures from the Bank of England, BBA and the FSB. This means that banks potentially missed out on a gross revenue opportunity of between £935m and £1.35bn last year.
Due to a lack of good information on the businesses that are applying, banks are potentially missing out on significant revenues from a number of sources such as interest payments, the ability to cross-sell other financial products and from their customers leaving the bank altogether.
A vocal minority who described the process in terms such as ‘“Byzantine” and “tortuous” could be putting off potential applicants. Having more accurate data on their customers for credit risk analysis will remove some of this burden.
Find out more - download the report If you’re interested in the findings and the methodology behind it, you can download the report here.











