Finance for Small and Medium-Sized Enterprises - DTI Home Page
Finance for Small and Medium-Sized Enterprises - DTI Home Page
Finance for Small and Medium-Sized Enterprises - DTI Home Page
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<strong>Finance</strong> <strong>for</strong> <strong>Small</strong> <strong>and</strong> <strong>Medium</strong>-<strong>Sized</strong> <strong>Enterprises</strong>: A Report on the 2004 UK Survey of SME <strong>Finance</strong>s<br />
Table 5.3: Reasons <strong>for</strong> Outright <strong>and</strong> Partial Rejections (Population Percentages) 37<br />
OVERDRAFTS TERM LOAN<br />
N p =216,160 N p =83,578<br />
N = 189 N = 56<br />
No Security 4% 0%<br />
Insufficient Security 18% 12%<br />
Poor Personal Credit History 5% 4%<br />
Poor Business Credit History 11% 4%<br />
No Credit History 8% 7%<br />
Applied <strong>for</strong> too much 7% 11%<br />
Too much existing debt 5% 0%<br />
Inadequate business plan 1<br />
0% 15%<br />
Industry too risky 2% 7%<br />
No reason given 25% 16%<br />
Other 6% 12%<br />
Don’t Know 9% 15%<br />
1. In fact 2 businesses in the sample (corresponding to 0.3% of the population) were denied an<br />
overdraft due to an inadequate business plan.<br />
This<br />
table shows that rejections rates due to no or insufficient security<br />
are:<br />
• 22% <strong>for</strong> overdrafts.<br />
• 12% <strong>for</strong> term loans.<br />
Rejection rates due to a lack of track recor d (no credit history) are :<br />
• 8% <strong>for</strong> overdrafts.<br />
• 7% <strong>for</strong> bank loans.<br />
On the other h<strong>and</strong>, rejection rates due to a poor credit history are:<br />
• 5% (personal history) <strong>and</strong> 11% (business history) <strong>for</strong> overdrafts.<br />
• 4% (personal history) <strong>and</strong> 4% (business history) <strong>for</strong> term loans.<br />
Also:<br />
• 5% of overdraft rejections are due<br />
to the business having too much existing<br />
debt.<br />
• 15% of loan rejections are due to an inadequate business plan.<br />
Comment For bus inesses denied overdrafts, 30% report being denied due to no/insufficient<br />
security or lack of track record. On the<br />
other h<strong>and</strong>, 21% of these businesses were<br />
38<br />
denied due to a poor credit history or too much existing debt. Similarly, <strong>for</strong> term<br />
loans, the percentage rejected due to insufficient security or track record (19%) is<br />
about the same as the percentage rejected due to a poor credit history or inadequate<br />
business plan (23%). These results suggest that a large proportion of businesses are<br />
rejected due to lack of security or track record. These businesses<br />
are potentially<br />
37<br />
The questions have multi-code responses so the percentages in each column need not add up to<br />
100%.<br />
38<br />
Howeve r, these results may be subject to ‘impression management’, with respondents preferring not<br />
to mention a poor credit history.<br />
67