SMALL and medium-sized enterprises (SME) are relying more on alternative sources of finance, despite more applications for loans and overdrafts being successful.
The figures released today by market research firm BDRC Continental show that the proportion of SMEs using alternative financing such as trade credit – a delay between the receiving goods and paying for them – and personal funds rose to 64 per cent from 37 per cent for 2014 to date.
The overall business environment seems to be improving along with the UK’s economic recovery, with 77 per cent of SMEs reporting that they are profitable, up from 69 per cent in the third quarter last year.
However, more SMEs are choosing not to borrow from banks despite 71 per cent of all loan and overdraft applications made in the 18 months to September being successful, up from 66 per cent in the 18 months to June.
The firms also say they are currently preferring to pay down current debt.
“For over a year now, SMEs have been in a more positive mood, but this has not translated into increased appetite for external finance,” said Shiona Davies, director at BDRC Continental.