New stats suggest smaller employers should be more optimistic on loans

Small businesses should be much more optimistic about accessing bank loans, new research suggests.

The figures have prompted a banking leader to claim there has never been a better time for smaller firms to approach their bank with a business plan.

The report found a huge "perception gap" between small firms' pessimism surrounding their application's chances of success and what actually happens.

Only half of small and medium enterprises' (SMEs) were confident of success on renewing financing in the third quarter of 2013, but 94% actually succeeded, the SME Finance Monitor from BDRC Continental found.

Just one in four were confident of securing a new application, but 46% were successful, said the monitor, whose studies date back to the beginning of 2010.

Anthony Browne, chief executive of the British Bankers' Association, said small companies are almost twice as likely to succeed in accessing finance as they think.

Mr Browne said: "With rates at an all-time low, there has never been a better time to approach your bank with a business plan."

Policymakers view SME financing as being vital to the growth required to maintain an economic recovery.

The figures also showed, however, that SME borrowing applications are less likely to succeed than before.

Statistics found that 61% of all loan and overdraft applications made so far this year ended in a funding facility, compared to 70% last year.

A record low of 15% of SMEs announced a borrowing "event" in this year's third quarter, including applications, renewals and the automatic renewal of an overdraft.

The rate of small firms enjoying growth in the past 12 months dropped to 36%, compared to 44% in the previous quarter.

Nearly half (47%) claimed they plan to grow in the next 12 months, down from 51%.

Shiona Davies, director at BDRC Continental, said there is no proof of increased optimism sparking an appetite for external finance, even among those companies planning to grow.

Lee Hopley, chief economist at manufacturers' organisation EEF, said the new figures underline the continuing challenges SMEs have faced in accessing finance during the last 18 months.

Copyright Press Association 2013