Another Crowd reviews today's figures from the SME Finance Monitor and highlights opportunities for peer-to-peer lenders and crowd investors. As a group, the UK's SME are in good financial health and are improving. One in ten SMEs grew by more than 20% in 2015. Larger SMEs are more likely to seek external funding.
Supporting small and medium sized businesses (SMEs) is one of the main reasons people go into crowdfunding. Whether it's equity or lending, ther's something very appealing about putting your money into a business that does something useful, and knowing your money is helping it succeed.
The SME Finance Monitor is a quarterly report into the financial health of Britain's small businesses. Its evidence is gathered from thousands of interviews with business owners (for the new release, out today, 5,000 interviews were conducted). That means it offers anyone interested in lending or investing some realiable evidence about SMEs appetites for finance, and the risks of investing in them.
The SME Finance Monitor is vital for understanding how SMEs are thinking on key financial issues.
To cover the risks first, the news is better than it was. The proportion of SMes with a worse than average external risk rating has fallen from 54% in 2013 to 46% in 2015.Almost all SMEs hold credit balances. and 24% held more than £10,000 in credit balances in 2015, up from 16% in 2012.
Around half of SMEs (47%) are what the Monitor calls permanent non-borrowers. They are not using external finance, and they have no interest in applying for any. But that leaves a very large pool to choose from .
The Monitor reports that 37% of all SMEs use external finance, but the ones that do are in the 'Medium' category, rather than the 'Small'. Fully 61% of businesses with 50-249 employees are reliant on external sources of finance.
This market represents a big opportunity for the peer-to-peer lending platforms, who are gearing up to accept lenders' funds in tax-free IFISA wrappers. WE imagine they will be sharpening their credit risk models and looking for healthy, medium sized businesses they can lend to.