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The Access to Finance survey was first carried out for reference year 2010. The most recent survey was carried out for reference year 2014 for all SMEs. There are significant methodological differences between the 2010 and 2014 surveys and the results are not comparable. Please see background notes for more detailed explanation. 

 

Larger SMEs were more successful when applying for bank finance in 2014

Over 70% of SME bank finance applications were successful. Applications from larger SMEs were more successful than smaller SMEs when applying for bank finance. Almost 92% of medium sized enterprises were successful compared to just under 70% of micro sized enterprises. Exporting SMEs were noticably more successful than non-exporting SMEs when applying for bank finance. Almost 95% of exporting SMEs were successful compared to 67% for non-exporting enterprises. See Figure 3 and Table 2.

Information and Communications (ICT) sector less likely to look for bank finance than other sectors but more likely to be successful 

Over a fifth of SMEs in the Industry, Construction and Selected Services sectors applied for bank finance in 2014. This was in contrast with the ICT sector where only 12.5% of SMEs applied for bank finance. However, the ICT sector had the highest rate of applications for equity finance at 3.9%. 

The use of finance types other than bank and equity finance was most prevalent in the Construction sector, with 8% of SMEs in this sector applying for other types of finance, such as loans from sources other than banks, leasing, factoring, etc. See Figure 4 and Table 3.

Looking at the success rates of bank finance applications for individual NACE sectors, the ICT sector reported the highest success rate with 84.3% of all applications approved, followed by the Construction sector where 73% of bank finance applications were successful.

The sector with the highest rate of unsuccessful bank finance applications was the Selected Services sector (retail, accommodation, food and professional services sectors) where 31.6% of applications did not succeed and a further 6.6% of applications were only partially successful. See Figure 5 and Table 4.

Higher growth enterprises more successful in bank finance applications than lower growth enterprises

Using increases in employment over time as a proxy for enterprise growth, it is possible to analyse the financial application experience by enterprise growth type. Enterprises classed as “high-potential start-ups” are SMEs established between 2010 and 2014 whose employment increased by at least 20% per annum over that period. SMEs classed as “other high growth” are enterprises established prior to 2010 whose employment increased by at least 20% per annum between 2010 and 2014. The remaining SMEs were classed as “other” enterprises. 

There was little difference in bank application rates between the three growth types (high-potential start-ups, other high growth, and other enterprises) – approximately 20% - there was however a marked difference in success rates by type of growth enterprise. Bank finance applications from SMEs which experienced more employment growth were more successful when applying for finance. Applications from high-potential start ups and other high growth enterprises achieved success rates of over 70%, compared to lower employment growth SMEs who recorded a success rate of 47.3%. See Figure 6 and Tables 5 & 6.

Working capital the main reason for majority of all finance applications 

More than half, 50.1%, of all applications for bank finance indicated that the finance was to be used as working capital. Nearly 40% of applications for other types of finance and  over a third  of applications for equity finance specified the need for working capital. Other reasons for seeking finance included investment in property, intangibles and export growth. See Figure 7 and Table 8.

If not applying for bank finance, 80% of SMEs indicated not needing the finance as the main reason

For SMEs not looking for bank finance, 80% of these enterprises indicated that their business did not need bank finance. Just under 7% of these SMEs did not apply for bank finance because they felt they would have loan repayment difficulties, while approximately 6% of those who did not apply believed that the banks were not lending. See Figure 8 and Table 9.

 

In relation to SMEs who did not look for equity finance, over 81% of these enterprises indicated that their business did not need it. Just over 6% of these SMEs did not apply for equity finance as it was not relevant to the business, with a further 5% not applying due to probable rejection. See Figure 9 and Table 10.

Existing relationship with a bank was the main reason SMEs chose a bank for a loan

When asked about the reason for choosing a particular bank for a loan, over 45% of SMEs  indicated the enterprise already being a client of  the bank was the main reason, with a further 21.5% of SMEs indicating that the branch was local to them. Only 8.9% of SMEs primarily selected their bank based on the interest related terms offered. See Figure 10 and Table 11.

Three-quarters of loan applications required collateral

SMEs reported that collateral was requested in 73.6% of bank finance applications. When collateral was required, the personal guarantee of the owner/director of the SMEs accounted for 53.9% of cases. A further 16.5% of applications had to provide collateral in the form of a property of the business. See Figure 11 and Table 12.

 

In almost 18% of unsuccessful bank finance applications, SMEs indicated they received no reason from the bank

SMEs indicated that they had not received any explanation for the refusal from their bank in 17.6% of cases. Lack of own capital was given as the reason in almost 17% of applications, while nearly 16% of SMEs reported that they were refused as the enterprise already had too much debt. See Figure 12 and Table 13.

When unsuccessful, over 40% of SMEs forgo the additional finance

Following a bank finance application refusal, 41.7% of SMEs decided to forego the funds applied for and continue to operate without the additional finance, while 16.1% of SMEs applied for alternative financing. See Figure 13 and Table 14.

1 in 7 of SMEs indicate they have outstanding property debt of an owner/director

When looking at credit exposures, 14.5% of SMEs indicated that they carry outstanding property debts of the owner or director. Of these SMEs, 38.8% identified it as a major obstacle to business performance, 35.5% cited this as a minor obstacle, while the remaining 25.7% reported that this debt was no obstacle to business performance.

When asked about business debt relating to property purchase, 8.8% of SMEs reported that they had such debt, and 8.5% of SMEs carried debts of the owner relating to the purchase of business premises. Around three-quarters of these SMEs view this debt as being an obstacle, either minor or major, to business performance. See Figures 14 & 15 and Table 16.

Almost half of SMEs expect to seek bank finance in the period 2015-17

When asked about their future finance options, 47.7% of SMEs said that they expect to seek bank finance in the period 2015-17, with a further 10.7%  stating that they expect to seek finance from their owners/directors. 

When asked about the purpose of any future financing  36.5% of SMEs indicated that the need for working capital will continue to be the main reason, with 17.9% of SMEs expecting to finance other investments. See Tables 17 & 18.