Turns Out Non-Borrowing SMEs Are Doing Fine

The accessibility of financing and loans is considered crucial to the well-being of a small business, and in the U.K., a decline in traditional bank lending to SMEs has led policymakers to support the rise in alternative lending options.

But the small business owners considered permanent non-borrowers – those who have not used external financing sources, nor do they plan to – are reportedly doing just fine.

New research from BDRC SME Finance Monitor found that permanent non-borrowers were actually found to be more profitable than SMEs that accessed external financing – 81 percent of PNBs were profitable, compared with 76 percent of small business borrowers, according to reports published Thursday (Sept. 3) in Startups. Analysts also found that these non-borrowers were almost just as likely as borrowing SMEs to have experienced growth in their businesses in the last year.

[bctt tweet=”Permanent non-borrowers were actually found to be more profitable than SMEs that accessed external finance”]

“’Permanent non-borrowers’ are an interesting group,” said BDRC Continental Director Shiona Davies. “Our new analysis of this group shows them to be profitable, hold credit balances and almost as likely to have grown as their peers.”

There were caveats, however. Davies added that PNBs are “less likely to be international, to have innovated or to plan to grow in the coming year.”

According to researchers, permanent non-borrowers were dubbed “less ambitious” than their borrowing small business counterparts; just 37 percent of non-borrowers said they are planning to grow their business in the next year, compared to nearly half of the borrowing SMEs that plan to grow. Non-borrowers were also found to have launched fewer innovations – 29 percent of PNBs launched some type of innovation, compared with 41 percent of borrowing small businesses.

Reports said that the state of small businesses in the U.K. is “overwhelmingly positive,” according to the BDRC report. The majority of SMEs (80 percent) said they made a profit so far this year, the highest percentage seen in the report so far. Small business optimism is up, too, with only 14 percent reporting that the current state of the economy is a “barrier” to their success. That figure compares to the 37 percent of SME owners that said as much in 2012, according to reports.

Davies highlighted that despite non-borrowers’ current successes, there are questions that can be raised – most notably, “could they be doing even better through using external finance?”

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