By Daniel Hunter
Businesses opting out of applying for finance could be missing out on opportunities to innovate, holding back levels of productivity in the UK.
According to data from the Better Business Finance SME (Small and medium-sized enterprises) Finance Monitor, businesses that successfully apply for a bank loan or overdraft are 32% more likely to have innovated — that is, developed a new product or service, or significantly improved an aspect of their business within the past three years.
The SME Finance Monitor interviewed 20,059 businesses over the course of a year. SMEs that stated they had successfully applied for bank finance were also:
- 38% more likely to have traded internationally
- 19% more likely to be planning to grow
- 15% more likely have grown in the past year
- 8% more likely to have made a profit
Richard Woolhouse, chief economist for the British Bankers' Association (BBA), said: “These figures make interesting reading — especially when seen in the context of wider concerns about British productivity. One of the worries about the recovery is that there is so far little sign that Britain’s productivity is improving.
“Innovation is one of the most important ways businesses can make themselves more productive. The fact that firms who won access to bank finance were 32% more likely to have innovated suggests that if more businesses felt confident about applying for credit our national productivity rates could receive a significant boost.
“Although many businesses are still considering whether to borrow, there has rarely been a better time to take out finance with your bank. Almost seven out of 10 applications for loans and overdrafts made by smaller firms are approved.”
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