Bank Overdrafts is the Most Popular Financing Option Among UK SMEs

Association of Chartered Certified Accountants (ACCA) conducted a survey on various financing options, that are being availed by SMBs in UK. The survey was conducted on 380 UK Small and medium firms and about 100 accountancy practices. The list of financing options and their success rate are as follows:

33% of the respondents opted for Bank Overdrafts with a success rate of 73%, making it the most popular form of financing.

29% of SMEs were seeking additional credit from suppliers (excluding late payment) with agreed terms in the past year, with 91% success rate. Late payment was opted by 17% of respondents in the past year, having 89% success rate.

21% of the respondents were found to be using other funding options like turning to owners, families, directors and friends. It was found to have 94% success rate.

It was also reported that the accesibility to the above finacing options were high for larger firms than small businesses. The micro enterprises (less than 10 employees) were found to be worst hit in accessing to finance from banks as their applications were not approved due to lack of security or collaterals.

Further 45% of SMEs were finding difficulty in getting credit from suppliers than banks and commercial lenders, as they were withdrawing credit from customers. 54% of them have tightened their credit policies and 13% of SMEs were hoping to withdraw credit from customers if it was commercially viable.

Despite the credit crunch, SMEs are failing to realize the importance of updating the credit related information for their businesses. They were further found to be relying on incomplete and very old information. 57% of micro firms were of opinion that credit reference information is not that important in taking credit decisions. 11% of respondents found tax deferral to be the most successful type of support provided to SMEs from Government.