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85% of SME finance applications successful

Tom Belger | 12:30 Tuesday 2nd October 2018

SMEs should be confident in approaching their bank for finance, according to UK Finance.

The comment follows BDRC’s latest SME Finance Monitor for Q2 2018, which found that 85% of SME finance applications reported in H1 2018 resulted in a facility.

The report also found that eight in 10 SMEs were satisfied with the way applications were handled and the final outcome.

The majority of applications for new/renewed facilities (67%) and for a loan or an overdraft (60%) were made to the SME’s main bank.

Some 17% of applications were made to another existing provider, 7% to a new provider, 4% to an online platform and 5% elsewhere.

Around a third of applications were made online (37%), more often by smaller SMEs, while most applications (76%) were in the name of the business rather than a personal name.

The research found that out of the 85% of applications resulting in a facility, 72% were offered the facility SMEs wanted and took.

Some 4% of applications saw the SME offered a facility that they declined and, in 12% of cases, the application was declined by the provider.

On a very small base, there was limited recall of the appeal or referral processes among SMEs declined by their bank.

“These figures show SMEs should be confident in approaching their bank for finance, as 85% of applications are successful,” said Stephen Pegge, director of commercial finance at UK Finance.

“It is encouraging to see six in 10 SMEs have a high level of trust in their main bank, which UK Finance and its members are working hard to improve further.”

The report also highlighted that in H1 2018, 34% of SMEs were using external finance, down from the 38% reported in 2017.

Chirag Shah, CEO at Nucleus Commercial Finance, felt that businesses shouldn’t shy away from what external finance could help them to achieve.

“With only a third of SMEs (34%) using external finance, there are many who are letting opportunities pass their business by.

“This may be holding back their expansion, restricting head count and denting profits. 

“…Businesses shouldn’t be afraid of exploring external finance options, especially as the data also shows us that 85% of applications are successful.

“As an industry, we need to support businesses in understanding the many options available to them to help them reach their full potential."

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