{"id":41457,"date":"2014-05-08T16:14:57","date_gmt":"2014-05-08T15:14:57","guid":{"rendered":"http:\/\/www.enterpriseresearch.ac.uk\/?p=41457"},"modified":"2022-03-30T16:27:37","modified_gmt":"2022-03-30T15:27:37","slug":"rebuilding-smes-confidence-to-borrow","status":"publish","type":"post","link":"https:\/\/www.enterpriseresearch.ac.uk\/rebuilding-smes-confidence-to-borrow\/","title":{"rendered":"\u00a0Rebuilding SME\u2019s confidence to borrow"},"content":{"rendered":"
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March 2014<\/p>\n

A new report from the Enterprise Research Centre (ERC) sheds more light on \u2018discouraged borrowers\u2019 \u2013 a previously under-explored group of SMEs who choose not to seek bank finance because they believe they will be unsuccessful. The report, \u2018Back to Borrowing? Perspectives on the \u2018Arc of Discouragement\u2019, identifies a group of around\u00a0 173,000 small business which are discouraged borrowers (about 4% of all firms). The report advocates six steps that banks, Government and others should take to encourage an extra 123,000 of these SMEs to apply for bank finance \u2013 two thirds of which the ERC estimates could be successful.<\/p>\n

The research found that the basis for discouragement is often the refusal of a loan or overdraft application in the past. However, insights from case studies of small firms indicated that it is as much the way the refusal is delivered that discourages borrowers as the refusal itself. The research also found that media coverage of bank lending appears to have had relatively little impact on perceptions that applications will be successful.<\/p>\n

Stuart Fraser, author of the report and Associate Professor of Enterprise at Warwick Business School,<\/strong> said: \u201cOur research raises a number of questions for banks, not least how important positive banking relationships are, and we\u2019ve heard high street lenders commit to improving the quality of their service to SMEs, which is a positive development. But we think there are a number of other steps that could be taken to ensure smaller borrowers are sufficiently informed of the process, their rights, and the support that exists for them.\u201d<\/em><\/p>\n

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Based on the findings of the research, the report recommends six measures for banks, Government and business support bodies to take that would help tackle the underlying issues that lead to discouraged borrower concerns:<\/p>\n