SMEs blame poor business health on lack of credit from banks

But one in six (17%) of those who are bearish blame the poor health of their businesses on having been refused credit by their banks.

More than half (55%) of SMEs are positive about the financial health of their businesses, with 31% describing it as ‘good’ or ‘excellent’. This compares with one in five (20%) who say that the financial health of their businesses is ‘poor’ or ‘very poor’.

The age group with most confidence in their businesses is the over-65s, of which 88% are positive, closely followed by 79% of those entrepreneurs aged 18-24. Those aged 35-44 were least confident, with only 36% positive about their businesses’ financial health.

Fleximize believes that this can be explained to some extent by 35- to 44-year-old SME owners probably being more pessimistic after having suffered the most from the 2008-2012 crisis when their businesses were quite young and unstable. Businesses currently owned by over-65s were probably more seasoned and stable in 2008 and perhaps weathered the crisis better. Businesses currently run by 18-24 year-olds were unlikely to have been around in 2008 and therefore have not experienced ‘doom and gloom’ yet.

Max Chmyshuk, Founder and Managing Partner at Fleximize, says:

"It is great that the majority of UK SMEs are showing confidence in their business. It demonstrates that the entrepreneurial spirit in the UK is alive and well and ready to play a key role in helping the economy return to robust growth. But for SMEs to do that they will need finance to support their growth initiatives. Traditional banks are currently falling short of what is needed in terms of funding them.

“It is a shame that many SMEs feel that their businesses could be healthier if they had access to a cash injection, but cannot find a lender or an investor. They are postponing potentially profitable projects and get stuck in a vicious cycle of underperformance. Far too often banks turn them down for finance because of rigid underwriting models, which result in a ‘no’ at the slightest sign of instability, even if that happened a few years ago.  At Fleximize we developed our own credit scoring system based on a more holistic assessment of companies where we combine traditional credit analysis with numerous new data points that became available recently, such as an online seller’s history, buyers’ reviews/feedback, social media footprint.”

Fleximize’s analysis of industry data reveals that between April and June this year, small businesses applied for around £2 billion of loans and some £419 million was rejected.  The corresponding figures for medium sized businesses are £4.558 billion and £410 million.