Small firms’ demand for financing declines as just 9pc apply for cash

MORE than 90 per cent of small businesses have not recently applied for extra loans or overdrafts, according to the SME Finance Monitor, a quarterly report.

Just nine per cent of 15,000 SMEs surveyed in the last quarter of 2011 said they had requested any new or renewed financing in the last year, down from 15 per cent in the first half of 2011.

The findings support claims by banks that net lending to small and medium-sized enterprises (SMEs) is falling due to lack of demand rather than reluctance from lenders.

Overall, just seven per cent had applied to renew their overdraft facility in the last year, and only three per cent of SMEs had applied for a loan.

Of those that did apply to renew their overdraft, two thirds were granted their request. And just over half of those applying for loans found the financing they wanted, with an additional nine per cent getting some form of extra finance, albeit not what they originally requested.

The research, which is funded by a collection of industry bodies including the British Bankers’ Association, found that two thirds of SMEs could be classified as “happy non-seekers” of financing.