According to data published by the very well regarded BDRC SME Finance Monitor, which is used by the government and banks to take the temperature of the economy, the first half of this year has seen a further improvement in the mood of small and medium sized business owners, with 54% of you describing your mood as 'good'.
Growth in sales and profit margins is being experienced in many sectors, as is investment in innovation. Rather than sit on their hands during the lockdown, business owners have been turning their minds to new and better ways of doing things. 22% are planning to invest in plant and machinery and 26% are looking for ways to significantly reduce their carbon footprint. Overall, growth ambitions are now back in line with 2019 levels.
6-in-10 borrowing more
However, it is not all wine and roses. The data confirms that many small businesses are coming out of the pandemic with levels of borrowing they've not experienced before. 6-in-10 that borrowed before COVID are borrowing more now, and 11% are borrowing for the first time. 45% are saying that most of the funds they raised via the government backed loan schemes have now been used, and one in ten are saying that they are worried about repaying what they owe. The concerns are most acute in hospitality and manufacturing.
(If this is you, let's talk. There are refinancing options available that we can explore with you).
Liquidity rules
Naturally, many of you are cautious regarding the use of finance and are basing your spending plans on what you can afford. Protecting liquidity has been the number one priority and 40% have injected personal funds to maintain cash flow in recent months - that's a new record.
Loans are being agreed
The encouraging piece of data for the 1-in-10 that do have an appetite to borrow is that 88% of all applications made to borrow between Q1 2020 and Q2 2021 were successful, with 85% securing the full amount of finance requested. Naturally, the government backed loan schemes have helped here and it is important to remember that these have changed, not gone away. The Coronavirus Business Interruption Loan Scheme and BounceBack Loan Scheme have been replaced by the Recovery Loan Scheme (RLS). You can find a helpful comparison in one of our earlier posts.
Even though the demand for finance is increasing again, lenders are seeing much less demand for the RLS than expected, with one senior banker saying in The Times this week that the number of applications is "extremely low".
Don't let this deter you, the RLS has many advantages and, once received, the funds can be used for any legitimate business purpose, including managing cashflow, growth and investment. We suspect many potential borrowers simply don't know whether they qualify and have no one to guide them.
Seek advice
The British Business Bank has accredited more lenders to the scheme recently and we can help you work out if the scheme and a particular lender is right for you. Accredited lenders have differing appetites for certain types of borrowing so it is worth working out your strategy first. Once agreed, one of our regulated advisers can support you with your application, from initial paperwork to pay-out.