According to the quarterly SME Finance Monitor, only a third of small businesses have been seeking out external finance in this year’s first quarter. This is the lowest level recorded so far.
The reason for this is a decrease in sole traders seeking loans, overdrafts and credit cards. Over the whole of 2013 a third had used these options, in Q1 of 2014 this had fallen to just 26%.
A drop has also been seen in small companies using personal funds over the last year. For the first quarter of this year, 30% used their own money for their businesses, while 27% said they regularly use trade credit.
More companies are now doing without any kind of finance at all. 48% are said to be ‘permanent non-borrowers’, which is the highest level ever recorded with it going up from 41% in the same quarter last year.
Phil Orford, chief executive of the Forum of Private Business, says that these figures highlight the reversal in the number of companies seeking out finance from external sources.
He said: “Although the continuing mistrust of financial institutions is understandable, it is vital that small businesses are able to take the opportunities that are presented to them and external finance should have a significant role to play in helping businesses fully realise their growth potential.”
There has also been a rise in profitable businesses, with 69% reporting a profit in Q1 2014, which is up from 64% in the same quarter last year.
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