2018 Business Finance Survey: SMEs - British Business Bank

www.british-business-bank.co.uk
@britishbbank
2018 Business Finance
Survey: SMEs
February 2019

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Contents
• Background – page 3
• Growth – page 4
• EU Referendum – page 11
• Awareness of Different Types of Finance – page 21
• Finance Usage and Application – page 25
• Perceptions of Raising Finance and Future Use – page 51
• Equity Finance – page 57
• Invoices and Late Payment – page 62
• Summing Up – page 68

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Background
• In 2012, BIS commissioned a new survey exploring the stages SMEs go through
when considering the need to raise external finance and the specific actions they
take (1,500 SMEs interviewed by CATI)
• The British Business Bank repeated the survey in 2014 (1,000 SMEs interviewed),
in 2015 (1,608 SMEs), 2016 (1,535 SMEs) and in 2017 (2,070 SMEs)
• 2018 survey is based on 2,000 interviews with SMEs in September and October.
Some new questions were added, but core questions remain the same enabling
comparison over time
• Statistically significant changes between the 2017 and 2018 surveys (at 95%
confidence level) are identified by green arrows (increases) and red arrows
(decreases)

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Growth

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Three in ten SMEs grew in the past 12 months
7%
37%
56%
%
Growth of business turnover in past 12 months
8%
8%
14%
45%
23%
Grown by 20% or more
Grown between 10% and 20%
Grown by up to 10%
Stayed around the same size
Become smaller
Has turnover grown 20+%
for previous 2 years?
Base = all SMEs in business 3+ years (n=1,927), Question B4. All SMEs grown 20+% past 12 months (n=200). Question B4/B5. (single code, prompted)
Yes
No
Don’t know
Proportion of firms with 3 years of
20%+ growth

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Expect to grow turnover in next 12 months
SME growth expectations in line with those seen in 2017
Base = all SMEs (n=2,000 In 2018), no employees n=821, micro n=667, small n=311, medium n=201. Question B6 (single code, prompted). C1/C2.
9
8
11
14
10
9
8
12
13
15
18
16
25
27
41
44
46
38
35
26
18
20
10
8
4
3
3
3
3
3
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All
No employees
Micro (1-9)
Small (10-49)
Medium (50-249)
% Grow substantially (20%+) % Grow significantly (10%-20%) % Grow moderately (up to 10%)
% Same size % Shrink/sell/close % Don't know/Other
36%
31%
48%
54%
67%
% Expect to grow
moderately or better
21% have
exported in
past 3
years
23% plan
to export
in next 3
years

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Growth expectations among SMEs that have exported in past 3 years
– by number of employees
SMEs that have exported in the past three years have higher growth expectations
Base = all SMEs who exported in the past 3 years (n=506 exporters in 2018, 1487 non-exporters), no employees exporters n=162, non-exporters n=658; micro exporters
n=162, non-exporters n=503; small exporters n=105, non-exporters n=205; medium exporters n=77, non-exporters n=121. Question B6 (single code, prompted).
17
16
20
14
9
14
14
14
16
17
18
16
20
29
43
34
33
37
31
26
16
20
7
8
5
2
3
2
4
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All
No employees
Micro (1-9)
Small (10-49)
Medium (50-249)
49%
46%
54%
59%
69%
% Expect to grow
32%
28%
47%
51%
66%
Non-
Exporters
Exporters

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Similarly, those planning to export are more optimistic regarding growth potential
Base = all SMEs to plan to export in the next 3 years (n=531 in 2018, 1431 non-exporters), no employees exporters n=171, non-exporters n=632; micro exporters n=172,
non-exporters n=485; small exporters n=107, non-exporters n=197; medium exporters n=81, non-exporters n=117. Question B6 (single code, prompted).
20
20
22
15
9
13
12
13
16
18
20
20
19
30
41
31
28
38
29
28
12
15
6
6
5
4
4
2
4
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All
No employees
Micro (1-9)
Small (10-49)
Medium (50-249)
Growth expectations among SMEs planning to export in next 3 years
– by number of employees
31%
26%
46%
49%
66%
Non-
Exporters
53%
52%
54%
61%
68%
Exporters
% Expect to grow

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Small and medium-sized businesses more optimistic about trading conditions than
micro businesses and sole traders
Base = all SMEs (n=2,000 in 2018) no employees n=821, micro n=667, small n=311, medium n=201. B7 (single code, prompted).
Expectations for the business’ trading conditions in the next 12 months
5
5
7
8
8
15
14
16
22
23
47
48
43
45
44
19
18
21
15
20
9
9
8
5
3
6
5
5
4
1
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All
No employees
Micro (1-9)
Small (10-49)
Medium (50-249)
% Significantly better % Slightly better % About the same
% Slightly worse % Significantly worse % Don't know/Refused
20%
19%
23%
30%
31%
Better

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Base = all SMEs (n=2,000). Question B8 (single code, prompted)
Obstacles in the next 12 months
60
48
54
11
21
20
8
13
13
6
8
5
6
6
3
4
3
2
5
1
3
0 10 20 30 40 50 60 70 80 90 100
% One - not an obstacle at all % Two to four % Five
% Six to seven % Eight to nine % 10 - a major obstacle
% Don't know
6-7
8% in 2018
9% in 2017
6-7
5% in 2018
5% in 2017
6-7
6% in 2018
6% in 2017
Around one in ten view recruitment and cash flow / late payment as significant
obstacles
Moderate
obstacle
8+ =
9% in 2018
8% in 2017
8+ =
5% in 2018
6% in 2017
8+=
10% in 2018
9% in 2017
Significant
obstacle
Issues recruiting and
retaining skilled staff
Cash flow or issues with
late payment
Availability of relevant
advice for your business

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EU Referendum

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6
6
6
56
57
53
29
29
31
9
8
10
0 10 20 30 40 50 60 70 80 90 100
All
No
employees
Employees
% More % Neither % Less % Don't know/Refused
Grow more/less as result of leaving EU - by number of employees
Base = all SMEs (n=2,000 In 2018, n=2,070 in 2017; no employees n=821 in 2018, n=855 in 2017 ; employees n=1,179 in 2018, n=1,215 in 2017. Question C6 (single code, prompted)
5%/22%
5%/21%
5%/25%
SMEs are more pessimistic about the impact of leaving the EU on growth than in
2017, although the majority see no impact
2017
More/Less

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5
33
222
7
4
5
14
10
11
EmployerNo employeesAll
Under a fifth of SMEs have made changes as a result of leaving the EU
Base = all SMEs (n=2,000 In 2018). Question C7 (multi code, prompted).
SMEs who have already made changes as result of leaving EU - by number of employees
17% have
already made
changes. More
likely for those
with employees
(22% vs. 15% with
no employees)
% exports
% investment plans
% prices of goods and services
% staff employed

@britishbbank
14
8
4
5 5
44
7
5
6
20
17
18
EmployerNo employeesAll
Around one in four plan to make changes, with more planning changes to investment
and staff
Base = all SMEs (n=2,000 In 2018). Question C8 (multi code, prompted).
SMEs who plan to make changes as result of leaving EU - by number of employees
27% plan to
make changes.
More likely for
those with
employees (32%
vs. 26% with no
employees)
% exports
% investment plans
% prices of goods and services
% staff employed

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Most SMEs have not seen any impact on sales so far but more expect sales will be
affected
Base = all SMEs (n=2,000 in 2018, Production n= 310, Construction n = 328, Distribution n=450, Business services n=598, Other services n=314). Question C11 (multi code, prompted)
Impact of leaving EU on sales by sector
22%
26%
24%24%
22%
24%
12%
20%21%
12%11%
16%
Other servicesBusiness
services
DistributionConstructionProductionAll
% Yes - will affect sales in next 12 months % Yes - already affected sales
Total yes has/will
affect sales: 32% 28% 30% 35% 37% 27%
% Yes - already affected sales % Yes - will affect sales in next 12 months

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12%8%15%10%17%
4%12%
7%
5%
10%
85%79%78%
84%
73%
14%10%6%
15%14%
10%
8%
25%8%10%
76%82%
70%
78%76%
Employees
Noemployees
Medium
Small
Micro
11%
8%
80%
Among SMEs expecting a change to sales, more expect a fall in sales in the next 12
months than in 2017
Impact of leaving EU on sales by size (employees) and sector
Base = all who already had or expect to have changes to sales (n=638 in 2018, Micro n=225, Small n=96, Medium n=59, No employees n=258, Employees n=380, Production n=101,
Construction n= 105, Distribution n=158, Business services n=203, Other services n=71) Question C12 (single code, prompted). All SMEs (n=2000 In 2018).
% Don’t know/Refused% Increase sales% Decrease sales
Micro
Small
Medium
No
employees
Employees
Production
Construction
Distribution
Business
Services
Other
services
All

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13%
67%
20%
Don’t
know
Employers more likely to report scaling back investment in 2018
Base = All employers who have already made or plan to make changes to investment (n=122 in 2018) Question C9 (single code, prompted). All employers who have already made or plan
to make changes to staff employed (n=164 in 2018) Question C10 (multi code, prompted)
Changes to investment and staff as a result of leaving the EU – employers only
42%
38%
32%
23%
20%
19%
18%
11%
6%
Hire fewer new staff than would have been
the case
Invest in training/ upskilling staff
Use staff on different contracts
Make staff redundant
Decrease number of hours of existing staff
Hire more new staff than would have been
the case
Increase number of hours of existing staff
Other
Don’t know/Refused
Changes to staffChanges to investment
A greater
amount
A smaller
amount
23% said a greater amount and
54% a smaller amount in 2017

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1
3
2
7
7
5
7
10
4
59
63
56
61
56
65
21
10
28
17
23
19
11
17
10
15
8
12
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All
Production
Construction
Distribution
Business services
Other services
% Increase sales by more than 20% % Increase sales up to 20%
% Decrease sales up to 20% % Decrease sales by more than 20%
3
There is a rise in the share of those expecting a decrease in sales of over 20%
Impact of leaving EU on sales
Base = all SMEs that have or expect changes to sales as a result of leaving EU (n=638 In 2018, n=558 In 2017; Production n=101 in 2018, n=100 in 2017; Construction n= 105 in 2018, n= 51 in 2017; Distribution
n=158 in 2018, n=159 in 2017; Business services n=203 in 2018, n=196 in 2017; Other services n=71 in 2018, n=49 in 2017). Question C12 (single code, prompted).
16%/8%
15%/10%
27%/5%
14%/7%
13%/12%
18%/4%
Increase 2017/18
% Don’t know/Refused

@britishbbank
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One-third of SMEs think obtaining equity or debt finance will be more difficult
Base = all SMEs (n=2,000 in 2018). Question C14 (single code, prompted)
Impact of leaving EU on obtaining debt and equity
12
11
24
23
42
37
2
2
1
1
18
25
0 10 20 30 40 50 60 70 80 90 100
% A lot more difficult % A little more difficult % No impact
% A little easier % A lot easier % Don't know/Refused
More
difficult/
easier
36%/3%
34%/3%
Debt
(e.g.
overdraft,
bank loan)
Equity

@britishbbank
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Among SMEs expecting a change to exports, there is rise in the share of those
expecting a decrease in exports, with a sharp increase of ‘don’t knows’
Impact of leaving EU on exports
Base = all SMEs who have already made or plan to make changes to exports as a result of leaving EU (n=124 in 2018). Question C13 (single code, prompted).
61% / 11%30 31 7 4 28
0 10 20 30 40 50 60 70 80 90 100
Decrease exports by more than 20% Decrease exports up to 20%
Increase exports up to 20% Increase exports by more than 20%
% Don't know/Refused
Decrease / increase

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Awareness of Different Types
of Finance

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Awareness of forms of external finance 2016-2018
Encouragingly, awareness of almost all external forms of finance has increased
significantly since 2017
89%
69%
70%
52%
41%
12%
86%
62%
60%
47%
32%
12%
88%
64%
51%
45%
38%
13%
Leasing/hire purchase
Venture capitalists
Crowd funding platforms
(a)
P2P lending
Business angels
Mezzanine finance
2018
2017
2016
Base = all SMEs (n=2,000 in 2018 n=2,070 in 2017/n=1,535 in 2016). Question A1 (multi code, prompted). Note (a) “Equity crowd funding platforms” in 2016

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Aware of who to approach for forms of external finance 2016-2018
Awareness of who to approach for specific products has also increased significantly
53%
33%
22%
21%
14%
6%
47%
25%
17%
17%
10%
5%
56%
22%
19%
18%
12%
5%
Crowd funding platforms
(a)
Venture capitalists
P2P lending
Business angels
Mezzanine finance
2018
2017
2016
Base = all SMEs (n=2,000 in 2018 n=2,070 in 2017/n=1,535 in 2016). Question A2 (multi code, prompted). Note (a) “Equity crowd funding platforms” in 2016

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52%
42%
33%
30%
27%
20%
17%
6%
53%
31%
26%
21%
23%
21%
13%
5%
Crowdfunding
IF/Factoring
Venture capitalists
Equity
P2P lending
Business angels
Mezzanine finance
London
Rest of UK
Awareness of who to approach for crowdfunding and venture capital is higher in
London than in many other regions
Base = all SMEs (Not London n=1,750, London n=250 in 2018). Question A1 (multi code, prompted). Question A2 (multi code, prompted). Note credit cards, government/LA grants, trade finance and
mezzanine finance not shown
Aware of who to approach
88%
61%
74%
73%
56%
55%
47%
11%
89%
63%
67%
69%
52%
52%
40%
13%
Equity
Venture capitalists
Crowdfunding
IF/Factoring
P2P lending
Business angels
Mezzanine finance
Aware of finance type

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Finance Usage and
Application

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More SMEs are using credit card finance and leasing/hire purchase than in 2017
Base = All SMEs (n=2000 in 2018) Question A6a_AA (multi code, prompted). All SMEs that sought finance in the last three years (n= 913 in 2018) A11b (multi code, unprompted). Those
not shown less than 5% for both currently use or sought.
Finance currently use and sought on last occasion
36%
26%
15%
12%
9%
6%
6%
2%
1%
10%
17%
20%
3%
15%
4%
1%
5%
6%
Credit card finance
Bank overdraft
Loans from directors
Bank loan
Family/friend loan
Equity from directors or friends or family
Loans from another individual/organisation
Something else
% Currently use
% Sought on last occasion
More are using credit cards and loans
from directors than in 2017
19% currently use loans or equity
from directors, family or friends

@britishbbank
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Finance used in establishing business, if started in last two years – top mentions
Personal savings are by far the most commonly used source of finance to establish
a business
Base = all SMEs who started business in last two years (n=67 in 2018). Question A3 (multi code, prompted). Those not shown 1% or less.
86%
14%
9%
8%
7%
6%
5%
2%
Personal savings
Credit card
Director Loan
Family/friends - loan
Loan from bank/building
society/finance company
Family/friends - gift
Government/Local
government grant
Mortgage/re-mortgage on
home

@britishbbank
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Sought external finance in the previous three years - by employee size and sector
Proportion seeking external finance in last three years is similar to 2017
41%
36%
54%
62%
71%
All
No employees
Micro (1-9)
Small (10-49)
Medium (50-249)
Base = all SMEs (n=2,000 in 2018). A6a (single code, prompted)
41%
52%
43%
39%
39%
38%
All
Production
Construction
Distribution
Business
services
Other
services
54%
micro SMEs
sought
external
finance in
2018,
compared
to 48%
in 2017

@britishbbank
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Credit cards and commercial mortgages are most commonly sought from banks
Base = all SMEs who sought each form of non-bank finance (n=194 for credit cards/n=46 for commercial mortgage/n=57 for invoice finance or factoring/n=41 for loans from another individual/organisation/n=280
for leasing or hire purchase. Data not shown for finance categories with a base below 30. Question A6c (single code, prompted). “Don’t know” excluded from chart.
Seeking finance from bank vs. another source
1972
8866
42
35
22
11
25
51
65
76
Leasing or hire
purchase
Loans from
another individual
or organisation
Invoice finance or
factoring
Commercial
mortgage
Credit cards
% Another source% Bank % Don’t know/refused

@britishbbank
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Main reason for seeking finance 2016-2018 - last occasion in last three years
Main reason for seeking finance is still for working capital or purchasing fixed assets
Base = all SMEs that sought finance in the last 3 years (n=913 in 2018/n=932 in 2017/n=886 in 2016), all SMEs seeking finance for working capital (n=375 in 2018, n=388 in 2017)
Question A13b (single code, prompted).
4%
1%
9%
33%
40%
3%3%
5%
34%
42%
3%4%
7%
36%
42%
Start businessRefinancingExpansionPurchase fixed
assets
Working
capital/cashflow
9% of SMEs sought external finance for expansion
in 2018, compared to 5% in 2017
2016 2017 2018

@britishbbank
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Capital is most commonly sought for the general running of the business and to
cover a short term gap in funds
Most common reasons for seeking working capital
56%
37%
32%
24%
22%
16%
5%
To continue trading / for general running
of business
To cover a short term gap until funds
were received from customers
For flexibility / convenience
As a safety net just in case
To fund general growth
To cover a short term gap due to
unexpected expense
To fund export activity
Base = all SMEs seeking finance for working capital (n=375 in 2018, n=388 in 2017) Question A14 (multi code, prompted). Codes 1% or less not shown except ‘don’t know’ (8%).
All SMEs seeking finance for refinancing (n=34 in 2018), Question A15 (multi code, prompted).
Most common reasons
for seeking to re-finance
were to keep business
open or expand the
business (39%),
followed by an
attractive offer of
finance (27%)

@britishbbank
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Base = all SMEs that sought finance in the last 3 years (n=913 in 2018), n=266 no employees, n=647 employees. Question A28/A29 (single code, prompted)
Amount of finance sought on last occasion by employee size
25
31
13
16
17
12
27
29
24
9
7
12
6
3
11
12
7
22
5
5
7
All SMEs
No
Employees
Employees
% Less than £5,000 % £5,000-£9,999
% £10,000-£24,999 % £25,000-£49,999
% £50,000-£99,999 % More than £100,000
% Don't know/Refused
Majority of SMEs sought less than £25,000 finance on the last occasion
2017
median
amount
£10,000
£6,000
£20,000
2018
median
amount
£10,000
£8,000
£20,000

@britishbbank
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Researching finance types online now second most common step
Base = all SMEs that sought finance in the last 3 years (n=913 in 2018), n=932 in 2017. Question A19 (single code, unprompted). Those not shown 1% or less.
Who spoke to first when finance need identified
33%
14%
11%
6%
5%
4%
3%
3%
3%
2%
2%
2%
Went directly to main bank
Researched finance types on internet
Spoke to supplier/dealer/manufacturer
Sought advice from other businesses/friends
Went to finance provider other than bank
Spoke to accountant
Spoke to finance adviser
Spoke to board/directors/seniors
Looked into finance options
Used a credit card/overdraft/existing facilities
Examined expenses/cash flow/company accounts
Went directly to another bank
36% went
directly to main
bank in 2017
10% researched
online in 2017
Sole traders
(43%) and those
trading over 10
years (39%)
more likely to go
directly to their
bank

@britishbbank
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Banks and finance providers are the top influencer on the decision of who to approach
Base = all SMEs who sought finance in the last three years (n=913 in 2018), Question A16 and Question A18 (multi code, unprompted). All who have sought more than one source of
information on decision on which type of finance to apply for (n=146 in 2018), Question A17 (single code, unprompted).
Sources of information that influenced decision
27%
24%
12%
7%
1%
19%
17%
20%
14%
8%
7%
11%
24%
29%
10%
4%
1%
21%
Self
Bank or finance provider
Internet
Advisor
Government
Other
% Influenced decision on
type of finance
% Main influence on type of
finance
% Influenced decision on
specific provider to approach

@britishbbank
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Number of providers considered 2016-2018
Four in ten businesses considered more than one provider in 2018
Base = all SMEs who sought finance in the last 3 years (n=913 in 2018 n=932 in 2017/n=886 in 2016). Question A22 (single code, unprompted)
55
56
60
15
11
12
14
14
12
3
5
5
8
7
6
2
2
1
3
5
3
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2018
2017
2016
% One % Two % Three % Four % Five+ % Don't know None
% considering
more than one
provider
40%
38%
35%

@britishbbank
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Number of providers contacted 2012-2018
A majority of SMEs continue to contact one finance provider, although long-term
trends suggest a positive shift to more providers being contacted
Base = all SMEs that considered a provider of finance in the last 3 years* (n=848 in 2018 n=865 in 2017/n=886 in 2016/n=715 in 2015/n=325 in 2014/n=588 in 2012). Question A23
(single code, unprompted)
58
58
69
61
66
71
17
12
11
18
18
11
10
11
7
10
11
7
1
3
4
2
1
5
4
4
3
4
2
4
10
12
6
5
3
2
0 10 20 30 40 50 60 70 80 90 100
2018
2017
2016
2015
2014
2012
% One % Two % Three % Four % Five+ % Don't know/Refused/Other
Mean = 1.6
Mean = 1.7
Mean = 1.5
Mean = 1.7
Mean = 1.5
Mean = 1.7

@britishbbank
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Having an existing relationship continues to be the most common reason for choosing
providers - fewer say the decision relates to the likelihood of obtaining finance
Base = all SMEs that sought external finance in the last 3 years (n=913 in 2018). Question A20 (multi code, unprompted). Those not shown less than 2%. Question A21 (single code,
prompted)
Reasons for choosing provider
41%
18%
13%
10%
9%
7%
5%
3%
3%
3%
2%
2%
2%
2%
2%
Existing provider/already have relationship
It was cheapest/most competitive in short or medium term
Ease of application (e.g. little paper work)
Trusted brand
Most suitable/appropriate for need
Long term costs/charges
Only option available/limited choice
Understanding/knowledge of our business
Customer service
Likelihood of successfully obtaining the finance
Speed of obtaining finance
Flexibility in drawing down and repaying money as needed
Short term servicing costs of finance
They were recommended
Terms and conditions (e.g. security required)
(7% in 2017)
Having an existing
provider continues
to be the most
common main
reason (36%)

@britishbbank
38
Base = all SMEs that contacted only one provider (n=469 in 2018, n=469). Question A26 (multi code, unprompted). Those not shown 1% or less.
Reasons for only approaching one provider on last occasion – top mentions
49%
14%
12%
11%
7%
5%
4%
2%
2%
Had an established relationship with that
provider
Cost/rates offered/best deal
Too much hassle contacting more than one
provider
They were my only/most obvious option
First one gave/had what I wanted
Only one available
Had type of finance I wanted
Too little time/needed finance quickly
High likelihood of successful application
Having a longstanding
relationship was also the
most common reason last
year (55%)
Having an established relationship is the most common reason for contacting only
one provider

@britishbbank
39
39
50
58
46
3
4
Half of SMEs contact providers other than the ‘big five’ banks when seeking finance
Base = all SMEs (n=2,000 in 2018); employers n=647, no employees n=266; Production n=188, Construction n=153, Distribution n=198, Business services n=252, Other services n=122. A25
(single code, unprompted). Note question changed since 2017 to include Santander in ‘big five’ banks.
Was finance sought from any of the five largest UK banks
50%46%
4%
Only sought
finance from
one of the five
main UK
banks
Contacted
other finance
providers
Employers
No employees
38
51
53
50
33
60
46
46
47
59
2
3
1
3
8
Production
Construction
Distribution
Business services
Other services
Other finance providersBanks only
Don’t know
Don’t know

@britishbbank
40
Base = all SMEs that sought finance in the last 3 years (n= 913 in 2018 /n=932 in 2017/ n=886 in 2016/n= 715 in 2015/n=325 in 2014/n=588 in 2012). Question A30 (single code,
prompted). *Note question wording changes since 2016
Whether successful in obtaining finance from first provider 2012-2018
82
81
84
71
79
72
3
5
6
10
8
5
2
2
1
5
3
4
9
8
7
9
6
13
2
3
1
5
3
4
2
3
1
1
2
2
2018
2017
2016
2015
2014
2012
% Offered all % Offered smaller amount % Decided not to continue/Rejected offer % Turned down % Other % Don't know/Refused
Offered any finance
2016 = 90%
2015 = 86%
2014 = 90%
2012 = 81%
2017 = 86%
2018 = 85%*
Around nine in ten get all or almost all the finance required from first provider

@britishbbank
41
89%
85%
78%
83%82% 82%83%
87%
79%81%
89%89%86%
82%84%
Medium (50-
249)
Small (10-49)Micros (1-9)No employeesAll SMEs
Success rates similar to 2017 overall, despite a significant fall for micro businesses
Base = all SMEs that sought external finance in the last 3 years (n=913 in 2018, n=932 in 2017/n=886 in 2016; 2018: no employees n=266/micros n=324/small n=187/medium n=136).
Question A30 (single code, prompted)
Successful getting all finance – by size of business 2016-2018
2016 2017 2018

@britishbbank
42
71%
87%85%
80%81%82%
75%
85%
74%
86%86%
81% 80%
86%
79%
91%
81%84%
Other servicesBusiness
services
DistributionConstructionProductionAll SMEs
SMEs in the distribution sector have become more successful in getting all finance
since 2017 but other sectors remain consistent
Base = all SMEs that sought external finance in the last 3 years (n=932 in 2017/n=886 in 2016/n=715 in 2015; 2017: production n=158/construction n=127/distribution n=199/
business services n=291/other services n=155). Question A30 (single code, prompted)
Successful getting all finance – by sector of business 2016-2018
2016 2017 2018

@britishbbank
43
Base = All SMEs with bank loan or commercial mortgage as most recent finance type (n=143 in 2018/ n=152 in 2016). A33 (Single code, prompted)
Whether bank loan/mortgage obtained was for the same tenor period requested
2016
2018
Slight increase in SMEs granted bank loans/mortgages for the tenor period requested
83
93
7
3
6
4
3
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Yes No - longer period No - shorter period Don't know

@britishbbank
44
Whether security was required for loan, types of security required and value as share of total loan
1%
1%
1%
2%
3%
13%
16%
23%
35%
Equipment or vehicles
Floating charge
Intellectual property or other “knowledge
assets”
Stock or debtors
Another type of security
Mixed property
Business property
Other personal assets
Directors or personal guarantee, or
personal property
For around a quarter of SMEs security was required for the loan, most commonly
director or personal guarantee
Base = all SMEs offered loan in their recent application (n=116 in 2018) Question A35b. All SMEs providing security for loan (n=43) Question A35c (multi-code, prompted). All SMEs
providing security for loan (n=43), Question A35d (single code, prompted).
27%
73%
Yes
No
Was security required? Types of security required
The most common value for
security as a percentage of the
total loan provided was 25% or
less (47%). Only 15% said it was
76%-100% of the value, and 8%
over 100% of the value

@britishbbank
45
Base = offered smaller amount/worse terms/turned down/didn’t accept finance (n= 87 in 2018). Question A32 (single code, prompted).
What was done next if not offered full amount
30%
19%
14%
13%
12%
2%
8%
1%
Give up/cancel plans
Put plans for finance on hold
Accepted the finance
Talk to another provider
Talk to them to try to negotiate a new or better finance
facility with them
Use an existing form of borrowing to replace some or all of
the finance
Other
Don’t know
Increase in those giving up or cancelling plans when not receiving all finance required
49% either gave up,
cancelled plans or put
plans for finance on hold

@britishbbank
46
Base = all SMEs that sought finance in the last 3 years (n= 913 in 2018, n=932 in 2017/n=886 in 2016), Base = all for whom experience of raising finance was worse than expected
(n=130 in 2018). Question A37 (single code, unprompted), A38 (multi code, unprompted). Top five answers shown only for why it was worse.
19%/17%
26%/13%
19%/15%
8
12
9
11
14
9
61
58
64
9
6
4
8
7
10
2
3
2
2018
2017
2016
% Significantly better % Slightly better
% Matched expectations % Slightly worse
% Significantly worse % Don't know/Refused
26%
20%
18%
14%
14%
Application took too long
Poor customer service
Rejected or not
accepted for finance
Strict terms and
conditions
Too much paperwork
Applications taking too long overtakes poor customer experience as the top reason
for dissatisfaction
Better/ worse
Experience of raising finance vs. expectations
2016-2018
Why worse than expected
2018

@britishbbank
47
Base = all SMEs that sought finance in the last 3 years from big five bank (n= 378 in 2018) or other provider (n=510 in 2018). Base = all for whom experience of raising finance was
worse than expected and sought finance from big five bank (n=70 in 2018) or other provider (n=46 in 2018). Question A37 (single code, prompted), A38 (multi code, unprompted).
15%/21%
24%/13%
6
11
9
13
62
62
10
7
11
6
2
1
Big five
banks
only
Other
finance
providers
% Significantly better % Slightly better
% Matched expectations % Slightly worse
% Significantly worse % Don't know/Refused
31%
20%
20%
16%
13%
12%
12%
8%
7%
23%
23%
8%
6%
19%
15%
7%
14%
12%
Application took too long
Poor customer service
Strict terms and conditions
General difficulties obtaining
finance
Too much paperwork
Rejected or not accepted for
finance
Lack of help support
Provider didn't understand
my business
High cost
Experience of raising finance from big five banks more likely than other finance
providers not to meet expectations
Better/ worse
Experience of raising finance vs. expectations Big
five banks vs. other providers
Why worse than expected
Other finance providersBig five banks only

@britishbbank
48
18% of SMEs sought external advice, with half of these going to their accountant
Base = all SMEs that sought finance in the last 3 years (n=913 in 2018, n=932 in 2017). A36 (multi code, unprompted)
Sought external advice when applying for finance on last occasion
9%
3%
3%
2%
2%
1%
1%
Accountant
Solicitor
Friends and family
Finacial advisor
Other
Business mentor
Don't know/refused
81% sought no advice
(same as 2017)

@britishbbank
49
22%
16%
18%18%18%
22%
27%
21%
15%
18%
15%
19%
17%
11%
13%
Medium (50-249)Small (10-49)Micro (1-9)No employeesAll
Proportion of SMEs using advice when seeking finance generally in line with 2017 but
falls significantly for businesses with 10-49 employees
Base = all SMEs that sought finance in the last 3 years (n=913 in 2018/n=932 in 2017/2016=886). A36 (multi code, unprompted).
*Note this is a net variable generated from use of at least one source of advice on the last occasion.
Sought external advice when applying for finance on last occasion* - 2016-2018 –
by employee size
2016 2017 2018

@britishbbank
50
24 23 21 30 3
% Very likely % Fairly likely
% Not very likely % Not at all likely
% Don't know/Refused/It depends
Likelihood of seeking external advice if had difficulties obtaining finance
More SMEs are ‘very likely’ to seek external advice if they needed finance in the
future compared with 2017
Base = all SMEs (n=2,000 in 2018); Question B3ii (single code, prompted). Base: All SMEs likely to seek external advice for external finance in the future (n=956); Question D6 in 2017.
Likely
47%
Unlikely
50%
Sole traders are less likely to seek
external advice than SMEs with
employees (52% unlikely vs. 46%)
Half of those likely to seek advice say they are likely to pay for
independent advice to help them obtain this finance (47%)

@britishbbank
51
Perceptions of Raising
Finance and Future Use

@britishbbank
52
Confidence in ability to raise finance
Improvement in confidence in assessing finance products offered by other providers
Base = all SMEs (n=2,000 in 2018). Question A4 (single code, prompted).
30
19
20
39
35
34
12
14
14
8
15
12
8
13
15
2
3
5
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Assessing finance products offered by
own bank
Assessing finance products offered by
other providers
Applying for external finance
% Very confident % Somewhat confident % Neither confident nor unconfident
% Somewhat unconfident % Not at all confident % Don't know/Refused
Confident
2017/2018
67%/69%
49%/54%
50%/54%

@britishbbank
53
Base = all SMEs (n=2,000 in 2018). A5 (single code, prompted)
Views on information provision, finance providers and banks
26
12
8
13
38
35
14
19
13
21
7
12
13
18
31
27
6
8
37
20
2
7
3
9
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
I know where to obtain information on the types of finance
and specific providers available
Providers give sufficient information about products for me
to judge their suitability
Banks are generally the only source of finance available to
smaller businesses
All banks are the same in the way they treat smaller
businesses
% Strongly agree % Tend to agree % Neither agree nor disagree
% Tend to disagree % Strongly disagree % Don't know
Around two-thirds are confident they know where to obtain information on the types
of finance and specific providers available

@britishbbank
54
Around three in ten SMEs still see moving banks as difficult
Base = all SMEs (n=2,000 in 2018). Question A5b (single code, prompted)
Ease of moving banks
17 39 11 21 7 4
0 10 20 30 40 50 60 70 80 90 100
Very easy Fairly easy % Neither/nor Fairly difficult Very difficult % Don't know/Refused
Easy/
difficult
56%/29%
Ease of moving
business
banking needs
to another bank

@britishbbank
55
8%
10%
13%
19%
21%22%
27%
32%
34%
42%
13%12%
32%
25%
28%28%
14%
27%27%
45%
Poorcredit
history
Taketoolong
Don'ttrust
providers
Economic
conditions
Providerseemed
reluctanttolend
Don'tknow
wheretoget
finance
StrictT&Cs
Tooexpensive
Fearofrejection
Avoidadditional
debt
Discouragement and reasons for not applying for finance
Base = all SMEs (n=2,000 in 2018) Question B1 (single code prompted). Base = All who wanted finance in last 12 months but did not apply (n=102 in 2018, n=85 in 2017) Question B2 (multi code, prompted). Note B2
codes at 5% or below not shown. Question B3 (single code, prompted)
Avoiding additional debt continues to be the most common reason for not applying for
finance
Avoiding additional debt continues to be the most common
main reason (23%), followed by fear of rejection (10%)
2017
2018
6% reported they
wanted to apply for
external finance in the
last 12 months but
something stopped them
(5% in 2017)

@britishbbank
56
Forms of finance considering applying for in next 3 months
Base = all SMEs (n=2,000 in 2018, n=2,070 in 2017). B3i (multi code, prompted). Note: Trust/charity funding, Invoice finance or factoring (asset based), commercial mortgage, equity finance
and peer to peer lending all 1%.
4%
4%
3%
3%
2%
2%
2%
2%
2%
Leasing/HP
Government/Local government grants
Bank overdraft
Bank loan
Credit card finance
Loans from directors
Loans from family/friend
Private lending / finance company
Crowd funding platform
83% do not expect to
apply for any finance in the
next three months
Fewer SMEs are seeking
credit card finance than in
2017
15% expect to apply for at least one external finance product in the next three
months
(4% in 2017)

@britishbbank
57
Equity Finance

@britishbbank
58
Three-quarters of those not using equity finance have not considered it
Base = all SMEs aware of alternative finance forms and not using/sought (n=1,182 for equity finance in 2018, n=1,245 in 2017). Question A6d_A (multi code, prompted). Note (a) new
code for 2018. Answer codes changed in 2018 questionnaire.
Considering or have applied for equity finance
10%
18%
You have considered equity finance but
have not applied (a)
You would consider applying for equity
finance in future
75% of firms aware of, but not
currently using equity, have neither
considered nor would consider using it
9%
12%
13%
11%
17%
20%
17%
21%
No employees
Micro (1-9 employees)
Small (10-49 employees)
Medium (50-249 employees)
% You have considered but have not applied
% Would consider applying in future

@britishbbank
59
Base = all SMEs that have sought equity finance in the last 3 years (n=96 in 2018). Question A7 (multi code, prompted)
Where sought equity finance from
30%
12%
12%
12%
12%
9%
6%
16%
A member of family or a friend
Any other third party organisation or another business
Within your business
A Venture Capitalist/VC
A Business Angel
Another provider of equity finance
A crowd funding platform
Don't know/Refused
Family members/friends most common source of equity, though over half used
other sources

@britishbbank
60
Base = All who applied for or have considered raising equity finance (n=403 in 2018). Question A9a (multi code, prompted). Note: different base to 2017.
Barriers to equity finance
62%
58%
47%
43%
42%
6%
8%
Reluctant to give up any control of the
business
Difficulties finding an investor who shares the
firm’s aims and objectives
Think the focus of investors is too short term
Difficulties in putting together the business
value proposition
Deciding on its suitability for raising finance
Something else
None of these
Giving up control and finding a suitable investor are the most common barriers

@britishbbank
61
Views of those who've not considered equity finance
64%
42%
34%
32%
28%
27%
2%
Our ownership structure means equity finance is not
appropriate/relevant
I don’t think the value of a share in our business would
be attractive to investors
I wouldn’t know where to start to look for investors /
where to obtain investment
I don’t really know anything about this form of finance
I wouldn’t know how to put together a business value
proposition
I don’t have the time to look into this form of finance
Something else
Base = all SMEs that are aware of equity and did not seek equity (n=868 in 2018) Question A9b (multi code, prompted). Note: different base to 2017.
Ownership structure is most common reason for not considering equity finance

@britishbbank
62
Invoices and Late Payment

@britishbbank
63
Giving and receiving trade credit
Around a third of SMEs offer trade credit to customers or receive trade credit
Base = all SMEs that give their customers trade credit (n=1,126 in 2018), all SMEs (n=2,000 in 2018). Question D1 (single code, prompted).
33%
66%
1%
Don’t know/ Refused
No
Yes
34%
65%
1%
Don’t know/ Refused
No
Yes
Give trade credit to customers Receive trade credit

@britishbbank
64
25 45 12 10 4 31
0% - All payments are on time Less than 20% 20-39% 40-59% 60-79% 80% or more Don't know
What percentage of payments, if any, from your business customers are typically late (i.e.
beyond the terms of the invoice)?
One-quarter of firms with B2B sales report all payments are received on time
Base: All SMEs with at least some B2B sales (n=1,283 in 2018) Question D8 (single code, prompted). New question in 2018.

@britishbbank
65
At least two in five SMEs report average delay in payment of at least one month for
invoices and trade credit
Base = all SMEs reporting late payment of invoices by business customers (n=1,017 in 2018), Question D9a. All SMEs who offer trade credit (n=457 in 2018) Question D9b (single code,
prompted). Not asked in 2017.
Average delay in payment
20%
36%
34%
6%
3%
20%
30%
37%
6%
1%
Less than two weeks
Two weeks to one month
Between one and three months
Between three and six months
Six months or more
Normal invoice (among SMEs
reporting late payment of invoices
by business customers
Trade credit (among all SMEs
who offer trade credit)

@britishbbank
66
Impact of late payments on the business
Cash flow issues are the most commonly suffered consequence of late payments,
being experienced by a third of SMEs reporting late payments
Base: All SMEs reporting late payment of invoices by business customers (n=1,017) Question D10 (multi code, unprompted). New question in 2018.
2%3%3%4%
7%
29%
Slower
turnover
growth
I have
been
forced to
use an
overdraft
facility
Emotional
impacts /
stress /
frustration
Late
paying
suppliers
I/we have
spent lots
of time
chasing
late
payments
My
business
has run
into cash
flow
difficulties
33%
9%
5%
4%
4%
1%
1%
Cash flow
Resources
Growth / profit
Borrowing
Personal Impact
Staff
Investment
Top Mentions
Mentions by category 51% report no impacts on the
business of late payment

@britishbbank
67
Actions taken to try and minimise the impact of late payments
Chasing debtors by phone or email is by far the most common action taken in
response to late payments, whilst a quarter take up preventative measures
Base: All SMEs for whom a late payment has had an impact (n=495 in 2018) Question D11 (multi code, unprompted). New question in 2018.
36%
8% 6% 6% 5% 5%
Constant
reminding
(phone /
email)
Suspended
new
business to
late payers
Writing to
debtors
Ask for
upfront
payment /
deposits
Better /
improved
payment
plan / term
Stricter
policies /
adjusting
T&Cs or
method of
payment
41%
26%
22%
3%
Debt recovery
Preventative
measures
Credit reduction
Outsourcing
measures
Top Mentions
Mentions by category

@britishbbank
68
Summing Up

@britishbbank
69
• Growth of business turnover and expectations for future trading
conditions remain broadly in line with those seen in 2017
• There is a small but significant jump in the percentage of SMEs
aiming to grow substantially in 2019
• Compared with 2017, more firms report leaving the EU has
negatively impacted growth and sales expectations and also
anticipate difficulties in obtaining debt and equity
• A majority (62%) say that Brexit has not and do not expect it to
have an effect on sales in the next 12 months
• Around a third (32%) report that Brexit has affected or will
affect sales, and of these, 80% report a negative effect
Summary - 1

@britishbbank
70
• Encouragingly, awareness of almost all forms of finance, and
specific providers, has increased since 2017
• More SMEs are using credit card finance and loans from directors
than in 2017, suggesting that personal finance continues to play
a strong role in SMEs financial repertoire
• The proportion of firms seeking external finance are generally in
line with those seen in 2017, although there is an increase in the
number of micro organisations doing so
Summary - 2

@britishbbank
71
• A majority of SMEs continue to consider one finance provider,
although long-term trends do suggest some positive shifts towards
SMEs considering a greater number of providers
• Encouragingly, more SMEs say they are very likely to seek
external advice if they experience difficulties obtaining finance
than in 2017 though less than half, of these, are likely to pay for it
• Among those aware of equity finance, there is a significant
increase in the proportion of SMEs who have considered it but not
applied for it
• Three top barriers to equity are: reluctance to give up control of
the firm, difficulties finding an investor who shares the firm’s aims
and objectives, and the perceived short-term focus of investors
Summary - 3

@britishbbank
72
• Confidence in the ability to raise finance, as well as views on
banks and finance in general, generally remain in line with 2017
levels
• There appears to be a decline in distrust towards providers as a
reason for not applying for finance, while debt aversion remains
the top reason for discouragement
• SMEs with B2B sales report just 25% of payments are received
on time. Firms report two in five late payments received are one
month or more in arrears
Summary - 4

@britishbbank
73
• Whilst over half report no negative impact on the business of
late payments, the most common is cash flow issues (reported
by a third of SMEs)
• In terms of actions taken to minimise the impact of later
payments, debt recovery appears to take precedence over
preventative measures (41% and 26% respectively among SMEs
for whom a late payment has had an impact)
Summary - 5

@britishbbank
No representation, express or implied, is made by British Business Bank plc and its
subsidiaries as to the completeness or accuracy of any facts or opinions contained in this
presentation and recipients should seek their own independent legal, financial, tax,
accounting or regulatory advice before making any decision based on the information
contained herein.
No part of this presentation should be published, reproduced, distributed or otherwise
made available in whole or in part in any jurisdiction where to do so would be unlawful.
British Business Bank plc is a public limited company registered in England and Wales
registration number 08616013, registered office at Steel City House, West Street,
Sheffield, S1 2GQ. As the holding company of the group operating under the trading
name of British Business Bank, it is a development bank wholly owned by HM
Government which is not authorised or regulated by the Prudential Regulation
Authority (PRA) or the Financial Conduct Authority (FCA).
It operates under its own trading name through a number of subsidiaries, one of which
is authorised and regulated by the FCA. British Business Bank plc and its subsidiary
entities are not banking institutions and do not operate as such.
A complete legal structure chart for British Business Bank plc and its subsidiaries
can be found at www.british-business-bank.co.uk.

2018 Business Finance Survey: SMEs - British Business Bank

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