SME Access To Finance Survey: 2019

Footnotes

1. Icons from www.flaticon.com

2. Centre for Business Research, August 2008: Financing UK Small and Medium-sized Enterprises: The 2007 Survey
https://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/research-projects-output/sme-finance-report-final.pdf

3. Scottish Government, SME Access to Finance Reports: July 2019, November 2009, 2010 and 2012.

4. Scottish Government, Small Business Survey Scotland Reports: 2014, 2015, 2016, 2017 and 2018.

5. As at March 2019, there were 354,125 small and medium-sized enterprises (SMEs) operating in Scotland, providing an estimated 1.2 million jobs. SMEs accounted for 99.3% of all private sector businesses, 55.4% of private sector employment and 41.5% of private sector turnover as at March 2019. Scottish Government, Businesses in Scotland 2019

6. Department for Business, Innovation and Skills, 2012, SME Access to External Finance SME Access to External Finance

7. Much of this has been adapted from: Department for Business, Innovation and Skills, 2012, SME Access to External Finance. Please refer to the report for a fuller explanation of the market failures that can affect the SME access to finance market.

8. Centre for Business Research, August 2008: Financing UK Small and Medium-sized Enterprises: The 2007 Survey
https://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/research-projects-output/sme-finance-report-final.pdf

9. These questions were new for 2019.

10. This was supplemented with additional sample from other suppliers.

11. As in previous surveys, the public sector and not for profit organisations were excluded.

12. Urban/rural locations are based on the Scottish Government's Urban Rural Classification 2013-2014.

13. Data from the Businesses in Scotland 2019 publication was used to derive the weightings for business size, sector and location.

14. The survey's screening data was used to derive a target weight for the number of businesses in the SME population that sought finance. However, as the businesses screened were sampled with the sector and size band targets in mind, a disproportionately larger number of bigger businesses were sampled. The screening data is therefore not fully representative of the business population as a whole. As larger businesses are more likely to borrow, the weighted survey results on the proportion of businesses seeking finance do not accurately reflect the overall SME population.

15. The BVA BDRC SME Finance Monitor Annual Report 2018 is an independent report based on a dataset of 18,002 SMEs in the UK. The Scotland sample consists of 1,520 SMEs.

16. The UK Government Longitudinal Small Business Survey 2019 is a large scale survey of 11,002 SMEs across the UK. Results are provided separately for SMEs with employees and for SMEs without employees. In Scotland, 849 SMEs with employees and 246 SMEs without employees took part in the 2019 survey.

17. Urban/rural locations are based on the Scottish Government's Urban Rural Classification 2013-2014.

18. Risk rating is based on the Dun and Bradstreet (D&B) Risk Indicator which provides an overview of the level of risk D&B believe is associated with each business. It measures this level of risk between 1 and 4 where 1 is minimum risk, 2 is low risk, 3 is average risk and 4 is above average risk.

19. This definition is in line with the OECD definition for high growth firms.

20. Businesses who only export to the rest of the UK are not included.

21. If the difference between two estimates is said to be statistically significant, it means that only in exceptional circumstances (1 in 20 times) would we expect the true difference not to be significant.

22. Source: Scottish Government, First Estimate of GDP: 2019 Q4

23. The UK experienced 0.0 per cent growth in the fourth quarter of 2019 compared to the previous quarter and grew by 1.1 per cent compared to the same quarter last year.

24. Source: Scotland's Labour Market: Labour Force Survey, November - January 2020

25. Over the same period, the UK employment rate was 76.5 per cent. This was 0.3 percentage points up on the quarter and 0.4 percentage points up on the year.

26. Over the same period, the UK unemployment rate was 3.9 per cent. This was 0.2 percentage points upon the quarter and no change on the year.

27. Source: Scottish Government: Quarterly National Accounts, Q3 2019

28. Source: Scottish Chambers of Commerce Quarterly Economic Indicator, Q4 2019

29. Low interest rates encourage spending as there is less incentive to save and borrowing is cheaper.

30. Data not available prior to 2013 Q2.

31. Bank of England Credit Conditions Survey 2020 Q1 (survey of bank and building society lenders)

32. Credit spreads reflect the difference between the interest rates faced by businesses and the base rate set by the Bank of England.

33. The data shows the net percentage balance of lenders reporting that spreads on loans to businesses had narrowed or widened over the quarter. A positive balance indicates spreads on loans narrowed over the quarter while a negative balance indicates spreads widened.

34. Data not available prior to 2013 Q2.

35. BVA-BDRC: SME Finance Monitor and Bank of England, Credit Conditions Survey, Q4 2019.

36. UK Finance: SME Lending and Deposits - GB 2019 Q3

37. UK Finance: SME Finance in the UK: Past, Present and Future and BVA-BDRC: SME Finance Monitor

38. This section draws on external data sources and does not use data from the SME Access to Finance Survey.

39. In the UK as a whole, use of finance amongst SMEs declined from 44 per cent in 2012 to 37 per cent in 2014 and has remained broadly stable since. Data is not available prior to 2012.

40. Note that the sample in Scotland for SMEs without employees is low at 246. The data for the UK as a whole may therefore be more reliable.

41. Comparable data is not available prior to 2016.

42. 261 SMEs sampled exported overseas.

43. While it appears that the proportion dropped from 2012, the difference is not statistically significant.

44. The option 'do not know what export credit insurance is' was not available in the 2012 questionnaire. In 2012, the proportion reporting that they had not used export credit insurance in the last year was 87 per cent, which is broadly in line with the sum of the proportions in 2019 reporting they didn't use it (51 per cent) and did not know what it was (39 per cent).

45. 21 businesses had experience with export credit insurance.

46. 22 per cent of SMEs with experience with export credit insurance responded 'don't know' when asked if they feel export credit insurance is harder or easier to obtain relative to previous years.

47. 36 per cent of SMEs with experience with export credit insurance responded 'don't know' when asked if they feel export credit insurance is more or less expensive relative to previous years.

48. 91 per cent of SMEs surveyed (953 businesses) reported that they currently use a current account.

49. A further 17 per cent cited reasons other than the options provided.

50. A further 21 per cent stated a reason other than the options provided.

51. 190 SMEs reported that they used personal credit cards for their business.

52. 382 businesses in the sample currently used an overdraft facility

53. 361 businesses in the sample currently used a deposit account.

54. 302 businesses in the sample currently used commercial loans/mortgages or unsecured loans.

55. 493 businesses in the sample currently used an overdraft and/or commercial loan or mortgage.

56. 190 businesses in the sample currently used personal credit cards for business purposes.

57. 590 businesses in the sample currently used business credit cards.

58. 125 businesses in the sample currently used grants from public bodies.

59. 4 per cent of SMEs currently using grant funding from pubic bodies received the funding from Innovate UK; 4 per cent from their local council; 3 per cent from Creative Scotland; 3 per cent from the Construction Industry Training Board; and 1 per cent each from Highlands and Islands Enterprise, Zero Waste Scotland, Scottish Rural Development Programme and Business Gateway.

60. Other reasons cited were: needed it for the business (16 per cent); cash flow (9 per cent); improve environmental impact (4 per cent); it was offered to us (3 per cent); for apprenticeship (2 per cent); needed funding for new projects/services (2 per cent).

61. 654 limited liability SMEs had not applied for equity finance in the past three years and were not currently using it.

62. 673 limited liability SMEs were surveyed.

63. 4 per cent did not know.

64. The dominance of RBS and BoS is also reflected in findings from the Small Business Survey Scotland which shows that 58 per cent of SMEs with employees in Scotland used either RBS or BoS for their current account in 2018.

65. In the 2019 survey 'TSB' and 'Lloyds Bank' were two separate banks, however at the time of the 2012 survey they were one financial institution 'Lloyds TSB Bank PLC'. Responses for Lloyds TSB Bank PLC for 2012 are stated as TSB in Figure 5.

66. This section draws on external data sources and does not use data from the SME Access to Finance Survey.

67. Please see the methodology section for further detail.

68. Percentage of businesses with a 'borrowing event' in UK as a whole in 2018 by size band: 0 employees: 13 per cent; micro (1-9 employees): 17 per cent; small (10-49): 21 per cent; medium (50-249): 32 per cent. Percentage of businesses with applications for new finance or renewals in 2018 by size band: 0 employees: 3 per cent; micro (1-9 employees): 5 per cent; small (10-49): 7 per cent; medium (50-249): 4 per cent.

69. Breakdown for business size for Scotland are not published in the UK Small Business Survey 2019. Breakdowns of the Scottish data will be provided in the separate Small Business Survey Scotland 2019 publication which was not published at the time of this report's publication. Results from the 2018 survey are therefore provided.

70. While demand for equity finance increased from 1 per cent in 2012 to 2 per cent in 2019, this change was not statistically significant.

71. 212 businesses sought new finance over the past 12 months.

72. The proportion of exporters happy to use external finance to help the business grow and develop was broadly in line with the all-firm average.

73. For all other sectors, the proportion was broadly in line with the all-firm average.

74. For all other sectors, the proportion was broadly in line with the all-firm average.

75. For all other sectors, the proportion was broadly in line with the all-firm average.

76. Some firms will have made several applications for finance. This measure counts a firm as turned down if it was turned down in any of its applications. It therefore includes businesses who were turned down in one application but were successful in another or several other applications for finance.

77. Please see methodology section for further detail on the definitions used within each sub group.

78. Businesses may fall into more than one these three 'business type' categories. Six per cent of SMEs sampled were new starts (61 businesses), 13 per cent were high growth (60 businesses) and 22 per cent were exporters (261 businesses).

79. It is not possible to provide results by sector, firm type or location for this measure given the low sample sizes involved.

80. The percentage turned down outright in at least one application and the percentage receiving less than wanted in at least one application does not sum to the percentage who said they were turned down or offered less as some firms will have been turned down for some applications and offered less for others

81. While there are some apparent differences between finance types, the results are not statistically significantly different to that for all finance types, likely due in part to the small sample sizes involved.

82. The results for equity finance and crowd funding are not shown here as the sample sizes are too low (below 10). The figures do not sum to 100%. Where results sum to less than 100%, this is because those businesses answering 'don't know' are not shown. Where results sum to more than 100%, this is because there appears to have been instances of businesses answering 'yes' to multiple options within each finance type for example a business saying that they were offered exactly what they wanted and also that they were offered less than they wanted. This may have been the case if a business had made more than one application for each finance type.

83. It is not possible to provide results by location for this measure.

84. For all other sectors, while the data shows there was a fall, the change from 2012 is not statistically significant.

85. While the data shows there was a fall in the application rejection rate for manufacturing, the change from 2010 is not statistically significant.

86. The 'other services' sector combines: hotels; transport; health/social work; other services.

87. For new starts and high growth firms, while the data shows there was a fall, the change from 2012 is not statistically significant due to the small sample sizes involved.

88. It is not possible to compare with 2012 due to a change in the way this question was asked in that year. For comparability with prior years analysis, those firms stating 'don't know' were removed from this question.

89. Individual percentages do not sum to 11 per cent due to rounding.

90. Just 11 firms surveyed had an 'above average' risk rating.

91. The findings for firms with 'above average' risk rating are not shown as the sample size (n=11) is too small to provide reliable results.

92. For all other proportions of finance sought that were obtained, the results for exporters were not statistically significantly different to those for all SMEs.

93. It is not possible to provide disaggregated results for this measure.

94. In line with previous years of the survey, the responses for this question were rebased to remove those stating 'don't know'.

95. Data is not available prior to 2010 as this question was introduced for the first time in 2010.

96. For all other firm types and sectors, the proportion reporting they were confident was broadly in line with the all-firm average.

97. Businesses are reported as confident if they responded 'fairly confident' or 'very confident'.

98. For all other firm types and sectors, the proportion reporting they were confident was broadly in line with the all-firm average.

99. 63 per cent of SMEs that considered or applied for external finance did not seek external advice and one per cent did not know.

100. The proportion of micro and small firms seeking advice was broadly in line with the all-firm average.

101. The sample sizes for this question are too low to allow for disaggregation by business type or sector.

102. The results by location (urban/rural) were both in line with the all firm average.

103. Highlands and Islands Enterprise, 2018, Access to Banking Services in Rural Areas.

104. The results for new starts and high growth firms were broadly in line with the all firm average.

105. The sample sizes are too small to allow sectoral or firm size analysis for this question.