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Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances Reasons for holding money on deposit Figure 7.1 Reasons for Holding Money on Deposit (multi-code response) 35% 30% 25% 20% 15% 10% 5% 0% Buffer To meet day To fund a For For pensionTo earn extra Client Other reason Don't know against a to day specific tax/national purposes interest deposits rainy day requirements project insurance purposes Reaso ns for holding money on deposit Base: All SMEs with d eposit accou nts N = 1,500,809 (Unweighted N = 1,410) This figure highlights the following motives for holding money on deposit p • A transactions motive (e.g., ‘to meet day to day requirements’ or to ‘fund a specific project’) is reported by more than 1 in 3 businesses holding deposits. • A precautionary motive is reported by almost 1 in 3 businesses holding deposits (‘buffer against a rainy day’). • An asset motive (‘to earn extra interest’) is reported by more than 1 in 4 businesses holding deposits. 97
Finance for Small and Medium-Sized Enterprises: A Report on the 2004 UK Survey of SME Finances 8 TERM LOANS AND OVERDRAFTS Term loans (including mortgages) Analysis of the data on amounts outstanding on term loans revealed the following information (see Table A8.1 in Appendix to Section 8) : • The average amount outstanding is £88,000 (±£20,000). • In total, SMEs have about £64 billion outstanding on term loans. For comparison with data collected by the British Banker’s Association (BBA), we looked at loans among businesses with a turnover of £1 million or less. These results show that: • The average amount outstanding is £59,000. • In total, these businesses owe about £35 billion in term loans. The BBA estimates that businesses, with a turnover of £1 million or less, owed about 55 £ 30 billion on term loans in the last quarter of 2003. Table A8.1 also shows that there are no significant differences in the amounts outstanding by gender, ethnicity, business age or growth rate. The distribution of the number of term loans used is reported in the following chart. Figure 8.1: Number of Term Loans 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 or more Number of Loans Base: All SMEs with term loans N = 742,139 (Unweighted N = 835) p 55 These estimates are based on large samples of small business lending data provided by banks. From December 2002, the data exclude loans to clubs, associations, charities and public sector organizations. 98
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