Only 15% of UK small businesses applied for overdrafts in the last year, says the British Bankers Association (BBA).
Their survey, which polled 5,000 businesses, also found that more than 70% of those who had applied for an overdraft extension had their applications approved.
A smaller survey carried out by market research consultancy BDRC Continental also revealed that nearly three quarters (72%) of applications by SMEs for all types of business credit were approved by banks.
Although businesses reluctant to approach their banks to renegotiate their borrowing arrangements can be reassured that more requests are accepted than declined, BDRC’s survey found that bank refusals have actually increased since the 2008 financial crash.
BDRC found that only 51% of respondents are currently using external finance, correlating with the BBA figures, and indicating a downward trend from 2007 (where 69% used external funding) and 2004 (81%).
Commenting on the figures, the Federation of Small Businesses (FSB) says that more must be done to encourage SMEs to seek institution financing. They feel that the lack of credit applications is due to SME apprehension about approaching institutions, as they may have been quoted unfavourable terms or been flatly refused approvals following the credit crunch.
The national chairman of the FSB, John Walker, says "Many small firms aren't going to the banks to access finance and credit and the main problem they face is the cost of credit."
Many small businesses have lost faith in the sector and are looking at other means of finance – and it is the smallest of firms that need finance most
John Walker, national chairman of the FSB
Also part of a pattern of reluctance to seek finance among SMEs, retailers are failing to come forward and request financial relief in the wake of the recent riots.
The High Street Fund, set up by a coalition of the London Mayor and larger businesses to help small businesses affected by last month’s rioting, has so far received funding applications from only 25 shop owners.
