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Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances • The range of financial services currently used by SMEs (Section 3) • New finances sought in the last 3 years (Section 4). In section 5, we look at the extent of unsatisfied demand among businesses needing new finance. In this context, we look at the extent of: • Outright rejection. • Partial Rejection (i.e., the businesses were offered less than they wanted). • Discouragement (i.e., the businesses did not apply because they believed they would be rejected). The second part concludes by examining issues relating to the supply of SME financial services (Section 6). In this context we look at: • The market shares of the main providers of financial services to SMEs. • The number of different providers used. • The nature of relationships with the main providers, principally − The breadth of relationships (number of financial services supplied by the main provider) − The length of relationships. − The cost of banking. − Levels of customer satisfaction. − The propensity to switch banks. From the point of view of competition, this analysis allows us to: • Examine the extent to which the supply of financial services is concentrated in a single supplier. • The degree of variation in charges across different providers. • The willingness of businesses to seek another provider. • The factors which motivate switching – dissatisfaction with price or service. The third part of the report presents analysis of the average and total amounts used of the different forms of finance. The analysis concludes by looking at the relationships between finances to determine which finances could be considered to be in competition with one another. In particular, this analysis gives some indication of which types of finance are potential alternatives to traditional bank debt. Appendices are provided at the end of the report to present more extensive tabulations. Technical preliminaries A few general technical points about the reporting of results in this document are required before presenting the results. Firstly, an ‘error margin’ is provided, along with the estimated percentages/means, in most instances. The estimated figure, plus and minus the error margin, gives a range of values which contains the population percentage/mean with 95% probability. 3 The larger the error margin, relative to the estimated figure, the greater the uncertainty about the population figure. A large error margin could be due to the variable under analysis varying widely in the population, or because the sample size of the cell is small. We can do nothing about the first source of uncertainty. However, regarding the latter source, cells with a sample size 3 Technically, the error margin is 1.96 times the standard-error of the estimate. 25
Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances of less than 50 observations are not generally reported since they are unlikely to provide informative estimates of the population figure. Secondly, all the results in this report are population weighted to reflect differences in sampling rates across size bands and sectors. Accordingly, the interpretation of the estimates adheres to the population of SMEs rather than the businesses in the sample. In this context, the notation ‘ N p ’is used to denote ‘number of businesses in the population’: this figure is simply the sum of the population weights for the businesses 4 in the sample to which the estimate relates. In contrast the notation ‘ N ’ denotes the corresponding number of businesses in the sample. Finally, all the analysis was conducted using the statistical software package Stata (version 7). In particular, the commands implementing code for survey-data analysis were used. This code uses the sampling weights and stratification employed in the survey to ensure that the estimates are consistent with the survey design. 4 The population weights are simply the inverse of the probability of selection into the sample due to the survey design. 26
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