SME Finance Monitor Q An independent report by BDRC Continental, November 2015

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1 SME Finance Monitor Q An independent report by BDRC Continental, November 2015

2 The SME Finance Monitor Q This survey was commissioned to provide a robust and respected independent source of information on the demand for, and availability of, finance for SMEs in the UK. Over 90,000 SMEs have been interviewed since the survey started in Q The report and supporting data is made available to all interested parties as a basis for decision making and strategy setting. It is used by Government, the Bank of England, the IMF and EU, the banks, trade bodies and academics The study covers: Overdraft and loan events in the past 12 months The appetite for new/renewed facilities The outcome of applications made, including rates and fees Reasons for not borrowing Future plans, including demand for future finance Awareness of Taskforce, and other, initiatives such as the Funding for Lending scheme Find out more at These charts include data up to the end of September

3 Today s presentation pack Provides the usual key highlights from the Q3 data set Updates the standard dashboard slides seen in previous presentations Where possible focusses on data over time to show how this market is evolving And also includes reporting on the new questions that were added in Q3 2015, as sample sizes allow As usual It is not our remit to assert whether the findings are good or bad And these results are the tip of the iceberg Most analysis is based on the 20,067 interviews YE Q Where feasible, data is also shown over time. Analysis by application date potentially includes all interviews conducted to date but much of the analysis focusses on applications made in the past 18 months (Q to Q3 2015) 3

4 Today s presentation Context Borrowing events in the last 12 months Outcome of applications and renewals The future 4

5 Context Borrowing events in the last 12 months Outcome of applications and renewals The future 5

6 Most SMEs are profitable. A steady 1 in 3 use external finance All SMEs YEQ million SMEs (45%) have a worse than average external risk rating 8% 3.4 million SMEs (74%) made a profit in the last trading year 1.6 million SMEs (36%) are using external finance 17% 36% 30% 74% 3% 45% 10% 9% 6% 61% Minimal Average Profit Loss Use external finance now Low Worse than average Broke even DK In past but not now Not in last 5 years Q241 / risk rating / Q14 / 15 Base : YEQ3 15 All respondents 20,067, and 18,339 for risk ratings 6

7 Three quarters of the largest SMEs have a minimal/low risk rating, compared to 1 in 6 of the smallest SMEs Current external risk rating YEQ3 15 Minimal Low Average Worse than average 8% 17% 6% 12% 11% 28% 20% 35% 30% 32% 27% 49% 42% 45% 50% 34% 22% 17% All SMEs 8% 6% 0 Emp 1-9 emp emp emp External risk rating Base : YEQ3 15 All respondents with a risk rating 18, /5824/6208/2926 7

8 The proportion of SMEs with a Minimal or Low risk rating has increased steadily since the start of 2013 Time series: Risk rating per quarter Minimal Low Average Worse than average 2% 13% 5% 6% 5% 6% 7% 7% 7% 7% 8% 9% 7% 8% 9% 10% 10% 10% 11% 13% 16% 15% 17% 18% 17% 17% 30% 32% 28% 29% 30% 31% 34% 30% 33% 33% 30% 31% 27% 55% 53% 55% 56% 54% 52% 47% 47% 45% 43% 44% 45% 48% Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 The overall risk rating profile is driven by 0 employee SMEs. They are the most likely to have a worse than average external risk rating (55% in Q3 2015), but an increasing proportion have a minimal or low rating for 2015 to date, 18% had such a rating compared to 10% in For those with employees the improvement has been from 31% to 46% over the same period Risk rating Base : All respondents with rating 4583/4545/4630/4535/4490/4528/4530/4607/4609/4584/4560/4594/4601 8

9 There is less variation by size of SME in terms of making any profit, but the amount made increases with size Profitability YEQ % Profit Broke even Loss DK 73% 76% 79% 80% 10% 9% 6% All SMEs 11% 9% 7% 6% 10% 9% 5% 5% 6% 7% 9% 9% 0 Emp 1-9 emp emp emp Once the DK answers are excluded, 79% of SMEs reported making a profit. This varied relatively little by size compared to other variables: from 78% of those with 0 employees to 88% of those with employees Amongst those who made a profit, 28% made a profit of more than 25,000 (excluding DK). This varied by size from 20% of 0 employee SMEs to 90% of those with employees Q241 Financial performance in last 12 month period Base : YEQ3 15 All respondents 20, /6645/6417/3002 9

10 The proportion of SMEs reporting making a profit has improved steadily over time Time series: Reported profitability in past 12 months, per quarter Profit Broke even Loss DK 62% 64% 64% 64% 65% 69% 69% 71% 73% 72% 74% 76% 75% 13% 13% 13% 13% 13% 11% 13% 11% 10% 11% 10% 10% 10% 17% 14% 15% 16% 15% 13% 10% 12% 12% 10% 10% 9% 9% 7% 9% 7% 8% 8% 6% 9% 6% 6% 7% 7% 5% 6% Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Most SMEs are profitable (74% YEQ3). Once the don t know answers are removed, 80% of remaining SMEs in Q reported having made a profit and this proportion has increased steadily over time, up from 69% in Q Q241 Base : All respondents 5032/5000/5000/5000/5008/5028/5000/5008/5023/5024/5038/5001/

11 SMEs with 10 or more employees are twice as likely to use external finance as the smallest SMEs Use of external finance now and in past 5 years YEQ3 15 Use any external finance now In past but not now Not in last 5 years 36% 3% 32% 3% 47% 59% 60% 4% 61% 66% 49% 4% 2% 37% 37% All SMEs 0 Emp 1-9 emp emp emp Amongst SMEs with employees, 49% are using external finance. The larger the SME, the more likely they are to be using external finance, and this is true for both core finance (loans, overdrafts and credit cards) and for other forms of finance. Q14/15 Has the business used any form of external finance in the past 5 years / which of the following forms does it currently use? Base : YEQ3 15 All respondents 20, /6645/6417/

12 Use of external finance remained unchanged in 2015 at 36%, compared to 46% in 2011 Time series: Use of external finance per quarter Use external finance now In past but not now Not in last 5 years 40% 41% 39% 43% 41% 40% 33% 39% 40% 36% 36% 36% 36% 5% 5% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 4% 55% 54% 57% 54% 56% 57% 64% 58% 58% 62% 61% 60% 61% Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 A third of SMEs are using external finance either core loans, overdrafts and credit cards (29% in Q3) and/or other forms of finance including invoice discounting and leasing (16% in Q3) Q15 Base : All respondents 5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/

13 Between 2012 and 2014 use of finance declined across all size bands, before stabilising in 2015 to date Time series: Use of external finance per quarter emps emps 2011: 46% 2012: 44% 2013: 41% 2014: 37% 1-9 emps 60% 59% 0 emps 49% 51% 47% 41% 50% 43% 40% 41% 39% 43% 41% 40% 33% 39% 40% 36% 36% 36% 36% 31% All SMEs Q Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Overall use of external finance is driven by the behaviour of 0 employee SMEs. Their use of external finance fell from 38% in 2012 to 32% in 2014 but has now stabilised. Amongst those with employees use of external finance also fell, from 59% in 2012 to 51% in 2014 and again this has been stable in Q15 Base : All respondents 5063/5055/5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5038/5001/

14 As overall, use of core finance has stabilised. Other forms of finance are typically used by around 1 in 6 SMEs Time series: Core and other financial products Use any external finance now Core products Other 50% 40% 22% 43% 36% 18% 43% 40% 41% 41% 39% 40% 34% 33% 32% 33% 33% 31% 21% 18% 17% 15% 15% 15% 33% 27% 13% 39% 40% 30% 31% 18% 20% 36% 36% 36% 36% 28% 29% 28% 29% 16% 16% 17% 16% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 The proportion of SMEs that only use core products (loans, overdrafts and/or credit cards) was 29% in By 2014 it had fallen to 20% and has remained at 20% for 2015 to date. 7% of SMEs only used one of the other forms of finance recorded (9% for 2013 as a whole), while 9% used both (as for 2013 as a whole) Q15/14 and others Base : All respondents 5000/5032/5000/5000/5000/5008/5028/5000/5008/5023/5024/5038/5001/

15 In 2015, half of SMEs meet the definition of a Permanent non-borrower, while a third use external finance Time series: Permanent non-borrowers and users of external finance Use any external finance now 50% 43% 40% 41% 41% 43% 41% 41% 48% 39% 40% 47% 48% 49% 46% Permanent nonborrowers 30% 34% 34% 37% 39% 36% 40% 40% 33% 39% 40% 36% 36% 36% 36% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 The Permanent non-borrowers are not using external finance and show no inclination to do so. In 2012, 34% of SMEs were PNBs, increasing steadily to 43% for 2014 as a whole. There has been a further increase in 2015 with 48% meeting the definition (Q1-3). Over the same time period, use of external finance fell from 44% in 2012 to 37% in 2014 and 36% for 2015 to date Q15/14 and others Base : All respondents 5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5001/

16 Amongst those with no employees the gap between PNBs and those using finance is widening Time series: Permanent non-borrowers and users of external finance 0 employee SMEs Use external finance now Permanent non-borrowers 52% 48% 44% 37% 38% 35% 32% 31% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 From 2013, SMEs with 0 employees have been more likely to be a PNB than to use external finance, and this gap has widened (from nothing in 2012 to 21 percentage points in 2015 to date) Q15/14 and others Base : All respondents with 0 employees 16

17 Those with employees remain more likely to be using external finance than to be a PNB, but the gap is narrowing Time series: Permanent non-borrowers and users of external finance SMEs with employees Use external finance now Permanent non-borrowers 59% 57% 51% 50% 24% 27% 32% 35% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 SMEs with employees remain more likely to be using external finance than to be a PNB. However the gap has reduced from 35 percentage points in 2012 to 15 in 2015 to date Q15/14 and others Base : All respondents with employees 17

18 The group of SMEs neither using external finance nor a PNB has become somewhat smaller over time Time series: Use of external finance per quarter Use external finance now Not PNB but no finance PNB 50% 43% 40% 41% 39% 43% 41% 40% 33% 39% 40% 37% 36% 36% 36% 20% 23% 26% 22% 20% 21% 19% 19% 19% 22% 20% 17% 16% 15% 18% 30% 34% 34% 37% 41% 36% 40% 41% 48% 39% 40% 47% 48% 49% 46% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Recently, as the proportion of PNBs has increased, the middle group has reduced in size (as the proportion using external finance has stabilised) Q15 Base : All respondents 5010/5023/5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5001/

19 The squeezed middle remains a clear trend amongst the smallest SMEs Time series: Use of external finance per quarter those with 0 employees Use external finance now Not PNB but no finance PNB 45% 37% 35% 37% 33% 38% 35% 35% 26% 35% 35% 32% 32% 32% 31% 21% 24% 28% 23% 22% 22% 20% 19% 20% 23% 21% 17% 15% 15% 19% 34% 39% 37% 40% 45% 40% 45% 46% 54% 42% 44% 51% 53% 53% 50% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Since Q the proportion of 0 employee SMEs using external finance has been fairly stable. As the proportion of PNBs increased, this reduced the middle group (who don t use finance but are not PNBs) from a quarter to less than a fifth of 0 employee SMEs. Q15 Base : All respondents with 0 employees 19

20 SMEs with employees are less likely to use external finance, with a similar proportion moving into the PNBs Time series: Use of external finance per quarter those with employees Use external finance now Not PNB but no finance PNB 65% 62% 56% 54% 54% 58% 59% 55% 52% 52% 54% 46% 50% 49% 50% 15% 15% 18% 18% 18% 17% 14% 16% 17% 17% 18% 16% 15% 15% 15% 20% 23% 26% 28% 28% 25% 27% 29% 31% 31% 28% 38% 35% 36% 35% Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Amongst those with employees, a consistent 1 in 6 or so are in the middle group neither using external finance nor a PNB. Q15 Base : All respondents with employees 20

21 Half of SMEs are neither using trade credit, nor any of the other forms of finance specified, with variations by size NEW QUESTION SUMMARY : Use of trade credit and other forms of external finance YEQ YE Q3 15, 33% of all SMEs use Trade Credit from suppliers. This varied by size 28% of 0 employee SMEs use Trade Credit compared to 60% with employees All SMEs 17% 17% use external finance and use trade credit regularly 48% are neither using external finance nor trade credit 48% 16% 16% use trade credit regularly but are not currently using external finance This varies by size of SME: 53% 0 emps 34% 1-9 emps 22% emps 18% emps 19% 19% use external finance but are not using trade credit regularly Q14/15/14y Base :YEQ3 15 All respondents 20,067 21

22 Just under half of SMEs offer and/or receive Trade Credit. 1 in 6 do both, increasing by size of business NEW QUESTION: Role of Trade Credit in the business YEQ3 15 No Trade Credit Receive only Offer only Offer & receive Offer: Receive: All SMEs 54% 16% 13% 18% 31% 34% 0 Emp 59% 15% 13% 13% 26% 28% 1-9 emp 41% 19% 13% 27% 40% 46% emp 26% 16% 14% 44% 58% 60% emps 26% 10% 15% 49% 64% 59% Receiving trade credit is much more likely to reduce the need for external finance (22% of all SMEs), than offering trade credit is to increase the need for finance (7% of all SMEs) Q14y Does the business offer or receive Trade Credit? Base : YEQ3 15 All respondents 20, /6645/6417/

23 1 in 5 of all SMEs say they need less external finance because they receive Trade Credit NEW QUESTION Impact of receiving Trade Credit All SMEs YEQ % of all SMEs say that they need less external finance because they receive trade credit from suppliers, increasing by size from 19% of those with 0 employees to 38% of those with employees. This is the equivalent of two thirds of those receiving Trade Credit say it reduces their need for external finance, and this varies little by size. 22% 10% 1% Require less finance Do not require less finance Not sure 19% 8% 1% 31% 14% 39% 38% 2% 17% 18% 67% No Trade Credit received 72% 54% 3% 4% 40% 40% All SMEs 0 Emp 1-9 emps emp emp Q14y3-5 Impact of Trade Credit? Base : YEQ3 15 All respondents 20, /6645/6417/

24 Fewer than 1 in 10 SMEs say they need more external finance because they offer Trade Credit to customers NEW QUESTION Impact of offering Trade Credit All SMEs YEQ3 15 7% of all SMEs say that they need more external finance because they offer trade credit to customers, increasing by size from 5% of those with 0 employees to 18% of those with employees. This is the equivalent of a quarter of those offering Trade Credit say it increases their need for external finance, and this varies little by size. 7% 23% Require more finance Do not require more finance 5% 21% 11% 16% 18% 1% Not sure 1% 28% 1% 38% 41% 69% No Trade Credit offered 73% 60% 3% 5% 42% 36% All SMEs 0 Emp 1-9 emps emp emp Q14y3-5 Impact of Trade Credit? Base : YEQ3 15 All respondents 20, /6645/6417/

25 Around a quarter of SMEs (typically the smaller ones) had received an injection of personal funds Injection of personal funds in past 12 months YEQ3 15 Yes chose to Yes felt had to No personal funds injected 14% 13% 1.2 million SMEs (27%) had an injection of personal funds in the previous 12 months 15% 14% 14% 12% 8% 5% 3% 8% 72% 71% 74% 85% 92% All SMEs 0 Emp 1-9 emp emp emp Q15d Has the business received an injection of personal funds from the owner/directors in the past 12 months? Base : YEQ3 15 All respondents 20, /6645/6417/

26 Injections of personal funds declined from a peak of 46% in Q and are now more stable at around 3 in 10 SMEs Time series: Injections of personal funds in previous 12 months Any injection of funds Felt had to inject funds Chose to inject funds 46% 41% 25% 26% 20% 16% 40% 40% 42% 24% 21% 22% 19% 20% 16% 38% 20% 18% 33% 18% 15% 30% 30% 28% 29% 15% 15% 15% 15% 15% 15% 13% 14% 26% 26% 14% 13% 11% 13% 30% 15% 15% Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q15d and others Base : All respondents 5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/5004 The proportion of SMEs injecting funds has fallen from a peak of 46% in Q3 of 2012 and is currently 30% in Q There has been a reduction in those saying they had to inject funds (26% to 15%), with a smaller reduction in those choosing to inject funds (20% to 15%) and separately fewer SMEs plan to inject funds in future 26

27 Including trade credit and personal injections increases net use of business funding from 36% to 63% for SMEs overall Use of business funding (net) YEQ3 15 External finance 36% = 36% + Trade credit + 36% 16% = 52% Incremental effect of including different types of funding, over and above the types of external finance detailed in the Monitor Personal funds 36% 16% 11% = 63% The uplift is more marked for smaller SMEs: 0 emps: 32% to 60% 1-9 emps: 47% to 72% emps: 59% to 81% emps: 60% to 79% Base : YEQ3 15 All respondents 20,067 27

28 Broadening the definition of business funding has most impact on the smaller SMEs Use of business funding (any) YEQ % use business funding 60% 72% 81% 79% 2% 6% 20% 18% 11% Personal funds 13% 19% 16% Trade credit 15% 36% External finance 32% 47% 59% 60% All SMEs 0 Emp 1-9 emp emp emp Including trade credit and personal injections of funds boosts the proportion of 0 employee SMEs using business funding from 32% to 60%. The uplift is less marked for larger SMEs who are more likely to be using a range of sources of external finance. Q15/14y/26d Base : YEQ3 15 All respondents 20, /6645/6417/

29 Most SMEs hold credit balances, and the proportion holding more than 10,000 is increasing over time Credit balances held over time None < 5k 5-10k 10-50k 50k+ 10k+ 17% 16% 16% 20% 23% 5% 5% 4% 6% 7% 12% 11% 12% 14% 16% 15% 14% 15% 17% 18% 63% 66% 64% 58% 56% 6% 4% 4% 5% 3% Q Q Since 2012, the proportion of SMEs holding 10k+ in credit balances has increased overall (16% to 23%) and across size bands: 0 emps: 10% to 17% 1-9 emps: 32% to 41% emps: 66% to 70% emps: 77% to 82% Q244 Base : Q All respondents excl DK 10,091 29

30 Most of those who hold 10k or more in credit balances say that this reduces their need for external finance NEW: Impact of credit balances on need for external finance Q Hold 10k + Reduces need for finance All SMEs 26% 79% 0 emps 19% 79% 1-9 emps 42% 78% emps 68% 79% emps 82% 76% In Q3 2015, a quarter of SMEs held more than 10,000 in credit balances, increasing by size of business. A consistent 8 in 10 of these SMEs said that they had less need for external finance as a result of the balances held, the equivalent of 15% of all SMEs. The 8 in 10 figure does not vary by whether the SME is currently using external finance or not. Q244 Base : Q3 15 excluding DK /1182/887/412 30

31 An decreasing proportion of SMEs with 10k+ in credit balances are using any external finance Facilities used by those holding 10k+ in credit balances over time Have OD Use Core finance Any external finance 52% 51% 52% 43% 41% 40% 20% 18% 18% 44% 43% 32% 34% 15% 14% Q Q Since 2012, the proportion of SMEs holding 10k+ in credit balances has increased from 16% to 23%, while within this group, use of external finance has declined from 51% to 43% and use of overdrafts specifically from 18% to 14%. Q244 Base : Q All respondents holding 10k+ in credit balances

32 The proportion of SMEs with some personal element to their business banking remains lower than in 2013 Time series: Personal element to banking per quarter 0 emps 1-9 emps 48% emps emps All SMEs 54% 53% 53% 52% 45% 42% 39% 38% 37% 38% 43% 31% 17% 8% Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 The most common personal elements remain an injection of personal funds (30% in Q3 2015) and/or using a personal account for business banking (20%). Both increased somewhat in Q3 leading to the higher overall figure reported, albeit this remains lower than in previous years for 2013 as a whole 53% had a personal element to their banking Q15 Base : All respondents 5000/5000/5008/5026/5000/5023/5038/5001/

33 Overall, the proportion of SMEs that export is stable over 2014 and 2015 Time series: Exporters All SMEs 29% emps 7% 8% 6% 5% 6% 8% 8% 9% 9% 9% 11% 9% 9% 9% 12% 19% emps 15% 1-9 emps 10% 0 emps Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 The proportion of exporters has increased somewhat since 2012 when 6% of all SMEs exported, compared to 10% in 2014 and also for YEQ This is due to more of the smaller SMEs exporting. Between 2012 and YEQ the proportion of 0 employee SMEs that exported increased from 5% to 8% and for 1-9 employee SMEs from 9% to 13%. It was unchanged for those with employees (21%) and slightly lower for those with employees (from 34% to 29%). Q223 Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/5001/

34 YEQ3 2015, 15% of exporters made half or more of their sales abroad, down from 24% in 2013 Proportion of sales that are exported YEQ <25% 25-50% 51-75% 76%+ 50%+ 15% 15% 15% 16% 19% 7% 8% 5% 5% 6% 8% 7% 10% 11% 13% 10% 8% 11% 17% 19% 75% 77% 73% 67% 62% All exporters 0 emps 1-9 emps emps emps Whilst the proportion of exporters has increased, the proportion of exporters who make more than 50% of their sales overseas has reduced over time. In 2013, 24% of exporters reported that half or more of sales were made abroad. By YEQ that proportion has fallen to 15% due mainly to fewer smaller exporters making high levels of sales overseas Q223a All exporters 34

35 Exporters are more likely to have grown, innovated and to make higher profits than those who don t export Exporters v non-exporters YEQ Exporters Non Exporters Use external finance Permanent non Borrower Grown in last 12 months* Innovated last 3 years 46% 35% 37% 49% 49% 39% 33% 63% Made a profit** Led by a woman 20% 21% 80% 79% There was little difference in the proportion making a profit. However 48% of profitable Exporters made more than 25k profit compared to 26% of profitable non-exporters Owner under 50 46% 51% Base : YEQ Exporters 2978 and non-exporters 17,089 * Excluding Starts and DK **Excluding Dk answers 35

36 .. And this is true whether they have employees or not Exporters v non-exporters YEQ Emps Employers Use external finance Exporters Non Exporters 41% 31% Use external finance Exporters Non Exporters 55% 48% Permanent non Borrower 41% 52% Permanent non Borrower 31% 37% Grown in last 12 months* 45% 36% Grown in last 12 months* 53% 46% Innovated last 3 yrs 30% 61% Innovated last 3 yrs 42% 66% Made a profit** 78% 78% Made a profit** 84% 82% Amongst 0 employee SMEs: 36% of profitable Exporters made more than 25k profit compared to 19% of profitable non-exporters Amongst SME with employees: 66% of profitable Exporters made more than 25k profit compared to 45% of profitable non-exporters Base : YEQ Exporters 2978 and non-exporters 17,089 * Excluding Starts and DK **Excluding Dk answers 36

37 Exporters are more likely to have had a borrowing event and to be successful with any overdraft applications made Borrowing profile in 12 months prior to interview 2015 to date Had any event Would be seekers Happy non-seekers 21% 4% 16% 19% 14% 3% 3% 6% 25% 23% 2% 3% 74% 81% 75% 83% 73% 74% Q All Exporters All non Exporters All Exporters - 0 emps All non Exporters - 0 emps All Exporters - with emps All non Exporters - with emps Exporters are more likely to have had a borrowing event and are less likely to have been a Happy non-seeker of finance. This difference is almost entirely due to the 0 employee SMEs who export. Future appetite for finance follows a similar pattern. Further statistical analysis showed that Exporters who apply for a new/renewed overdraft are more likely to be successful than their non-exporting peers (allowing for size, age of business etc) but that there is no impact on loan application success rates Q115/209 Base : All respondents :0 emps 207/2795 and 1+ emps 2013/10,028 37

38 Exporters are more likely to be planning to apply for finance and this is primarily due to Exporters with no employees Anticipated borrowing profile for next 3 months 2015 to date Plan to apply Would be seekers Future Happy non-seekers 21% 10% 11% 11% 21% 10% 10% 12% 20% 16% 9% 10% 70% 77% 69% 79% 72% 74% Q All Exporters All non Exporters All Exporters - 0 emps All non Exporters - 0 emps All Exporters - with emps All non Exporters - with emps Exporters are more likely to be planning to apply for finance and are less likely to expect to be a Happy non Seeker of finance. This difference is almost entirely due to the 0 employee SMEs who export. Q115/209 Base : All respondents :0 emps 207/2795 and 1+ emps 2013/10,028 38

39 Exporters are consistently more likely to be planning to grow, even once size has been taken into consideration Time series: Growth aspirations All SMEs Q % exporters plan to grow 46% non exporters plan to grow 51% 47% 48% 46% 53% 45% 43% 42% 43% 49% Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 The uplift in growth aspirations for those who export v those who don t is 42% to 63% for all SMEs YEQ and more marked for SMEs with no employees: 0 emps: 39% to 62% 1-9 emps: 51% to 63% emps: 61% to 74% emps: 65% to 77% Q225 Base : All respondents 5023/5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/

40 Those planning to grow are much more likely to be planning to sell more into existing markets than into new ones Where growth will come from all planning to grow YEQ All planning to grow New markets (net) 24% 12% of all SMEs planning to grow say they will do so through sales overseas, whether in a new or existing market = 5% of all SMEs New market in UK 22% New market overseas 6% 44% of all Exporters planning to grow say they will do so through sales overseas, whether in a new or existing market = 28% of all Exporters = 3% of all SMEs Existing market (net) Existing market in UK 89% 86% 6% of all non-exporters planning to grow say they will do so through sales overseas, whether in a new or existing market Existing market overseas 8% = 2% of all non-exporters = 2% of all SMEs Base : YEQ ,477 Excluding Dk answers 40

41 Very few of those not currently exporting plan to grow through sales overseas (6% v 44% of Exporters) Where growth will come from all planning to grow YEQ Exporters Non Exporters New markets (net) New market in UK 21% 20% 36% 43% 44% of all Exporters planning to grow say they will do so through sales overseas, whether in a new or existing market New market overseas 4% 23% = 28% of all Exporters = 3% of all SMEs Existing market (net) Existing market in UK 87% 89% 79% 88% 6% of all non-exporters planning to grow say they will do so through sales overseas, whether in a new or existing market = 2% of all non-exporters = 2% of all SMEs Existing market overseas 3% 39% Base : YEQ ,477 Excluding Dk answers 41

42 Context Borrowing events in the last 12 months Outcome of applications and renewals The future 42

43 Larger SMEs are more likely to be prepared to borrow to help the business grow Attitudes to finance YEQ3 15 Agree Agree strongly Aim to pay down debt and remain debt free 34% 41% 75% 0 emps: 74% emps: 74% 1-9 emps: 75% emps: 72% Happy to use external finance to help business grow 34% 11% 44% 0 emps: 43% emps: 57% 1-9 emps: 51% emps: 59% Q238a5 Base : All SMEs YEQ ,067 43

44 There has a slight increase in the proportion of SMEs prepared to borrow to grow, including the smallest SMEs Time series: Attitudes to finance Agree: Aim to pay down debt and remain debt free Agree: Happy to use external finance to help business grow 76% Emps 76% No emps 69% 73% 74% 75% 76% 53% Emps 46% No emps 39% 44% 44% 45% 48% Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 All SMEs Base : All respondents 5008/5023/5038/5001/

45 4 in 10 SMEs agree that whilst prefer to be debt free would also be happy to use finance to help business grow SUMMARY Attitudes to finance YEQ3 15 All SMEs 31% gave some other combination of predominantly neutral answers 31% 39% 39% of SMEs aim to be debt free but would be happy to use external finance to help the business grow. This has increased over time (32% Q to 40% Q3 2015) 27% aim to be debt free and would not be happy to use external finance to help the business grow the debt averse 27% 3% 3% are not looking to be debt free and would be happy to use external finance to help the business grow Larger SMEs are slightly more likely to be prepared to use external finance to grow even though they have a preference for being debt free (44% for those with employees v 38% of those with 0 employees) Q238a5 Base :All SMEs YEQ ,067 45

46 New for Q3 2015, 8 in 10 SMEs say their plans are based entirely on what they can fund themselves Attitudes to finance Q3 15 only Agree Agree strongly Aim to pay down debt and remain debt free 34% 41% 75% Happy to use external finance to help business grow 37% 11% 48% If our cost of borrowing increased by 2% we would struggle* 20% 11% 31% NEW: Our current plans for the business are based entirely on what we can afford to fund ourselves 41% 39% 80% NEW: If our bank were unable to help us with the finance we needed, we would be happy for them to pass on our request to an alternative lender 31% 11% 42% Q238a5 Base : All SMEs Q * statement previously asked about an interest rate increase of 2% 46

47 Those with a potential appetite for finance are more willing to have their details passed on Attitudes to finance Q3 15 only NEW: Our current plans for the business are based entirely on what we can afford to fund ourselves 41% 39% 80% NEW: If our bank were unable to help us with the finance we needed, we would be happy for them to pass on our request to an alternative lender 31% 11% 42% Affordability: Smaller SMEs are more likely to agree with this statement (82% with 0 employees) than larger ones (65% with employees). No difference by risk rating, age of business, growth plans or whether they are currently using external finance or a PNB Alternative lender: No difference by size band, risk rating or age of business. Those currently using external finance were more likely to agree (54%) than those not using it (36%), with a similar lower score for PNBs (33%). 45% of those planning to grow agreed with the statement Q238a5 Base : All SMEs Q

48 Larger SMEs are less likely to base their plans solely on what they can fund themselves Attitudes to finance Q only new and old questions 0 emps 1-9 emps emps emps 76% Aim to pay down debt and remain debt free 72% 77% 73% Our current plans for the business are based entirely on what we can afford to fund ourselves 82% 78% 71% 65% 66% Agree with BOTH statements 56% 62% 51% Q238a5 Base : All SMEs

49 A small minority of SMEs have ever been declined, but if they have, it has made them more reluctant to seek finance Impact of previous financial decline YEQ % ever declined 4% 2% Declined - more reluctant Declined - Not more reluctant 6% 6% 5% 3% 4% 4% 2% 2% 2% 3% 2% 1% 94% Not declined 94% 94% 95% 97% All SMEs 0 Emp 1-9 emp emp emp 6% of SMEs said that they had been declined for bank funding in the past. Amongst those who have, around three quarters said it had made them more reluctant to seek finance subsequently the equivalent of 4% of all SMEs. Q240X Thinking more broadly, has the business ever had either an application for a loan or overdraft, or a more informal request for flexibility on a facility, turned down by your bank? And has this previous decline made you more reluctant to apply for bank finance? Base : YEQ3 15 All respondents 20, /6645/6417/

50 6 in 10 SMEs have never been declined and are not using external finance at the moment Use of external finance YEQ by previous events: All SMEs 33% of SMEs have never been declined and are using external finance 62% have never been declined and are not using external finance 62% 33% 1% 2% 2% 2% have been made more reluctant by a decline and are not using external finance 1% were declined but are not more reluctant and are using external finance 2% have been made more reluctant by a decline but are using external finance Q240xy Base :All SMEs YEQ ,067 50

51 8 out of 10 SMEs said they had had no wish, or need, to apply for loan/overdraft funding in the previous 12 months Borrowing profile in last 12 months YEQ3 2015: 3% wanted to apply but didn t: The would-be seekers All SMEs 3% 16% 16% had a borrowing event, typically applying for new or renewed facilities, or an automatic renewal of facilities 81% Q25/26/115/209 Base : YEQ All respondents 20,067 81% did not apply and did not feel anything had stopped them, the happy non-seekers 51

52 Most SMEs are Happy non-seekers of finance. A declining minority wanted to apply but felt something stopped them Time series: Borrowing profile in 12 months prior to interview New definition from Q4 2012: did anything stop you applying Had any event Would be seekers Happy non-seekers 22% 21% 17% 19% 15% 17% 14% 17% 18% 15% 18% 16% 16% 7% 7% 6% 7% 4% 4% 3% 5% 5% 3% 2% 3% 11% 67% 73% 76% 76% 78% 79% 82% 78% 77% 82% 79% 82% 80% Event in: Yr to Q3 12 Yr to Q4 12 Yr to Q1 13 Yr to Q2 13 Yr to Q3 13 Yr to Q4 13 Yr to Q1 14 Yr to Q2 14 Yr to Q3 14 Yr to Q4 14 Yr to Q1 15 Yr to Q2 15 Yr to Q3 15 The proportion of Happy non-seekers has increased over time, from 68% for 2012 to 81% for YEQ Over the same time period, the proportion reporting a borrowing event has declined from 1 in 4 to 1 in 6 SMEs and the proportion of would be seekers continues to fall Q115/209 Base : All respondents 5000/5032/5000/5000/5000/5008/5026/5000/5023/5024/5038/5001/

53 Applications for new/ renewed facilities and automatic overdraft renewals have been stable over recent quarters Time series: Borrowing events in 12 months prior to interview Type 1 Type 2 Type 3 Auto renewal 12% 12% 12% 11% 10% 10% 4% 3% 3% 2% 1% 1% 9% 9% 9% 8% 8% 8% 8% 8% 8% 7% 8% 7% 7% 7% 7% 5% 4% 6% 3% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 1% 8% 7% 8% 7% 8% 6% 4% 3% 3% 1% 8% 7% 3% 3% 2% 2% Interviewed in: Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 In Q3 2015, 8% of SMEs reported having applied for new/renewed facilities (ie a Type 1 event) in the previous 12 months. As many SMEs had experienced the automatic renewal of an overdraft (7%). These figures have changed very little since the start of 2013, but remain at lower levels than were seen in Q26 Base : All respondents 5000/5032/5000/5000/5000/5008/5026/5000/5008/5023/5024/5038/5001/

54 0 employee SMEs remained less likely to have had a borrowing event in the 12 months prior to interview Borrowing profile Had an event YEQ All SMEs Had event by size (new definition) 81% 16% 16% 14% 23% 25% 17% 3% ALL SMEs 0 emp 1-9 emp emp emp 0 employee SMEs remain less likely to have had a borrowing event than those with employees (14% compared to 23% of those with employees) Q115/209 now includes automatic overdraft renewals Base YEQ3 15 All respondents 20, /6645/6417/

55 8 out of 10 SMEs had not sought finance, or wanted to Borrowing profile Happy non seekers YEQ All SMEs Happy non seekers by size (new definition) % 16% 81% 81% 83% 74% 73% 82% ALL SMEs 0 emp 1-9 emp emp emp Q115/209 now includes automatic overdraft renewals Base YEQ3 15 All respondents 20, /6645/6417/3002 The proportion of Happy non-seekers has increased over time, from 68% for 2012 to 81% for YEQ as a whole. Those with employees are somewhat less likely to have been a Happy non-seeker (74%) 55

56 3% of SMEs had wanted to apply for loan/overdraft facilities in the previous 12 months but hadn t Borrowing profile Would be seekers YEQ All SMEs Would-be seekers by size (new definition) 16% 81% 3% 3% 3% 3% 2% 1% ALL SMEs 0 emp 1-9 emp emp emp SMEs with fewer than 10 employees are more likely to be would be seekers, and the proportion is declining over time Q115/209 now includes automatic overdraft renewals Base YEQ3 15 All respondents 20, /6645/6417/

57 Discouragement and the Process of borrowing remain the key barriers to applications for loans or overdrafts Main reason for not seeking borrowing All Would be seekers YEQ % of SMEs were Would be seekers of finance Main reason for not applying: 2% of SMEs wanted to apply for an overdraft, but didn t why not? 2% of SMES wanted to apply for a loan but didn t why not? Discouraged: had asked informally but felt put off, or assumed would be turned down 34% (23% indirect v 11% direct) 41% (31% indirect v 10% direct) Process: think it s too expensive, too much hassle, needs security 35% 31% Principle: prefer not to lose control, or can get funds elsewhere: no longer includes prefer not to borrow 18% 16% Climate: felt it was not the right time to borrow in the current economic climate 6% 4% Q116a/210a Base : YEQ3 15 All would be seekers 350/244 57

58 Context Borrowing events in the last 12 months Outcome of applications and renewals The future 58

59 80% of applications made in the last 18 months were successful, with higher success rates from 2014 Time series: Outcome by application date ALL applicants / renewals (loans and overdrafts) 68% 75% 64% 58% 73% 72% 79% 75% 88% 78% 82% 77% 51% 58% 51% 43% 62% 56% 63% 64% 70% 69% 69% 61% 17% 17% 13% 15% 11% 16% 16% 11% 18% 9% 13% 16% 6% 4% 7% 8% 4% 6% 8% 7% 2% 5% 1% 5% 10% 17% 21% 26% 23% 23% 14% 18% 17% 18% 30% 33% Applied: Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Offered what wanted and took it Have facility after issues Took other funding instead No facility 80% of applications made in the last 18 months (Q to Q3 2015) were successful. This has been increasing over time 68% were successful for the 18 months to Q Q64/66/81/92/97 Base : All interviews to Q All respondents who have had response from bank From Q4 13: 589/537/582/582/443/479/369/217 INTERIM DATA 59

60 Almost all renewals are successful. Applications for new money were more likely to have been successful in 2014 Time series: Outcome by application date ALL renewed v new money (loans and overdrafts) 85% 92% 95% 97% 94% 96% 98% 98% 98% 90% 100% 98% 100% 100% 81% 54% 47% 52% 57% 36% 41% 56% 59% 66% 65% 70% 64% 60% Applied in: Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414* Q115* Q215* % have new loan/overdraft facility % have renewed loan/overdraft facility Those who have borrowed before remain more likely to be successful with an application for new money (74% in 18 months to Q3 2015) than FTAs (62%) but success rates for both have improved since 2013 Base : All applicants Renewals: 255/200/ 233/180/92 INTERIM DATA New money 305/219/ 223/170/112 INTERIM DATA 60

61 Taking both loans and overdrafts together, almost all renewals have been successful Time series: Outcome over time all applications made in each quarter (loan or overdraft) Renewals, by application date 95% 97% 94% 95% 98% 98% 98% 90% 100% 98% 100% 100% 74% 82% 78% 78% 90% 89% 79% 79% 89% 95% 93% 95% 21% 15% 16% 17% 8% 9% 4% 1% 4% 4% 2% 1% 19% 11% 11% 4% 3% 7% 5% Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Offered what wanted and took it Have facility after issues Took other funding instead No facility 97% of renewal applications made in the last 18 months (Q to Q3 2015) were successful. This has changed relatively little over time 96% were successful for the 18 months to Q All respondents who have had response from bank Renewals: 255/200/ 223/180/92 INTERIM DATA 61

62 Applications for new money were more likely to be successful in 2014 Time series: Outcome over time all applications made in each quarter (loan or overdraft) New money, by application date 52% 57% 36% 41% 56% 59% 66% 65% 81% 70% 64% 60% 58% 38% 40% 53% 37% 43% 55% 59% 53% 24% 26% 15% 19% 10% 17% 13% 19% 23% 13% 10% 11% 11% 8% 7% 9% 10% 7% 9% 13% 8% 3% 9% 2% 16% 40% 37% 38% 32% 21% 26% 21% 34% 54% 49% 36% 24% 9% 31% Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Offered what wanted and took it Have facility after issues Took other funding instead No facility 70% of new money applications made in the last 18 months (Q to Q3 2015) were successful. This has been increasing over time 49% were successful for the 18 months to Q All respondents who have had response from bank New money 305/219/ 232/170/112 INTERIM DATA 62

63 Success rates for first time applicants remain lower, but have improved over recent quarters Outcome of all applications applied for Q to Q (loan and overdraft) 70% total 62% 74% Offered what wanted and took it Have facility after issues 56% Took other funding instead No facility 52% 58% 14% 6% 24% 10% 5% 32% 16% 6% 19% All applications for new funds 1st ever facility Other new money First time applicants are less likely to be successful than other applicants for new money. However, the 18 months to Q has seen a further increase in success rates for FTAs (62% from 39% for the 18 months to Q4 2013) and a smaller increase over time for other new money applicants (74% from 69%) Q64/66/81/92/97 Base : All applicants Q to Q who have had response from bank /779 63

64 Across the most recent 18 month period, nearly 9 in 10 of those who applied now have an overdraft. Result of overdraft applications applied for Q to Q Offered what wanted and took it Have overdraft after issues Took other funding instead No overdraft 74% 11% 85% of overdraft applicants now have a facility 12% 3% The current success rate (86%) continues the trend for increasing success rates for overdrafts (it was 74% for the 18 months to Q4 2013) All analysis of applications is now made by application date rather than interview date. To ensure robust base sizes for sub-groups, analysis is based on all applications made in the last 18 months, that is Q to Q Q64/66/81/92/97 Base : All applicants Q to Q who have had response from bank

65 Since the start of 2014, more than 8 in 10 overdraft applications have been successful Time series: Outcome by application date ALL overdraft applicants / renewals 77% 76% 66% 74% 81% 74% 85% 84% 88% 89% 82% 81% 60% 61% 53% 54% 72% 64% 68% 71% 73% 80% 73% 70% 17% 15% 13% 20% 9% 10% 17% 13% 15% 9% 9% 11% 2% 5% 4% 5% 4% 5% 7% 4% 1% 4% 1% 6% 22% 19% 15% 8% 12% 11% 8% 17% 30% 21% 21% 13% Applied: Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Offered what wanted and took it Have facility after issues Took other funding instead No facility Q64/66/81/92/97 Base : All applicants interviewed to Q All respondents who have had response from bank From Q1 2014: 356/367/285/311/233/146 SMALL BASE interim data 65

66 The model predicts improving overdraft success rates which have been bettered in 2014 but not, thus far, in 2015 Time series: Outcome by application date overdrafts compared to predictive model % have overdraft facility % predicted to have facility 71% 74% 78% 74% 79% 78% 82% 78% 82% 82% 81% 78% 81% 84% 71% 71% 77% 76% 66% 74% 81% 74% 85% 84% 88% 89% 82% 81% Applied in: Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414* Q115* Q215* The model has predicted slightly higher success rates for most of the quarters since Q Success rates for 2014 are currently above those predicted by the model, unlike those for 2015 to date Q64/66/81/92/97 Base : All applicants interviewed to Q All respondents who have had response from bank From Q1 2014: 356/367/285/311/233/146 SMALL BASE interim data 66

67 Larger applicants remained more likely to be offered what they wanted. Success rates improved for smaller applicants Outcome of overdraft all applications/renewals applied for Q to Q % total 81% 90% 93% 96% 74% Offered what wanted and took it Have overdraft after issues 69% 81% 85% 89% 11% 3% 12% All applicants Took other funding instead No overdraft 12% 3% 9% 16% 3% 8% 7% 1% 7% 5% 4% 0% 0 emp 1-9 emp emp emp 86% of overdraft applications made in the last 18 months (Q to Q3 2015) were successful, up from 74% in the 18 months to Q This is primarily due to increased success rates amongst applicants with 0 employees (68% to 81%) and those with 1-9 employees (79% to 90%). Q64/66/81/92/97 Base : All applicants Q to Q who have had response from bank /513/568/189 67

68 Applicants with poorer external risk ratings have seen a more marked improvement in their success rates Outcome of overdraft all applications/renewals applied for Q to Q % total 97% 94% 91% 80% 74% Offered what wanted and took it Have overdraft after issues 92% 79% 81% 67% 11% 3% 12% All overdraft applicants/renewals Took other funding instead No overdraft 15% 10% 1% 5% 4% 8% 2% 2% 13% 3% 17% Min Low Avge Worse than avge Compared to the 18 months to Q4 2013, there has been some increase in success rates for each risk rating but notably those with an average risk rating (83% to 91%) and worse than average risk rating (59% to 80%) Q64/66/81/92/97Base : All applicants Q to Q who have had response from bank /494/339/281 68

69 FTAs for overdrafts are less likely to be successful, but their success rate has improved over time Outcome of overdraft all applications/renewals applied for Q to Q % total 68% 74% 100% Offered what wanted and took it Have overdraft after issues 74% Took other funding instead No overdraft 56% 61% 93% 12% 3% 13% 11% 3% 12% All overdraft applicants/renewals 29% 1st ever overdraft 18% 8% Increased overdraft 7% 0% Renew at same level Success rates for first time applicants continued to improve (from 34% for the 18 months to Q to 68% for the current period). Renewals remained the most likely to be successful. Q64/66/81/92/97 Base : All applicants Q to Q who have had response from bank /162/880 69

70 Across the most recent 18 month period, 7 in 10 of those who applied now have a loan. Result of loan applications applied for Q to Q Offered what wanted and took it Have loan after issues Took other funding instead 24% No loan 55% 70% of loan applicants now have a facility 15% 6% The current success rate of 70% continues the steady improvement seen over recent quarters (58% of loan applicants were successful in the 18 months to Q4 2013) All analysis of applications is now made by application date rather than interview date. To ensure robust base sizes for sub-groups, analysis is based on all applications made in the last 18 months, that is Q to Q Base : All applications made Q214 to Q315 who have had response from bank

71 There is no clear pattern for loan success rates, but they have been somewhat higher in more recent quarters Time series: Outcome by application date ALL loan applicants / renewals 61% 53% 72% 58% 36% 61% 68% 64% 61% 88% 55% 81% 44% 50% 35% 17% 18% 22% 4% 13% 3% 35% 25% 34% 42% 46% 46% 52% 54% 27% 26% 12% 9% 15% 12% 7% 11% 11% 3% 8% 9% 12% 36% 24% 26% 31% 27% 52% 64% 46% 24% 9% 1% 8% 8% 37% 61% 20% 1% 19% Applied: Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115 Offered what wanted and took it Have facility after issues Took other funding instead No facility Base : All interviews to Q All respondents who have had response from bank From Q /215/158/168/136 SMALL BASE interim data 71

72 The model predicts a gradual improvement in loan success rates - actual results have been more variable Time series: Outcome by application date loans compared to predictive model % have loan facility % predicted to have facility 55% 61% 60% 61% 57% 53% 63% 72% 66% 58% 61% 64% 63% 61% 68% 66% 67% 68% 64% 61% 88% 66% 55% 68% 81% 36% Applied in: Q1 12 Q2 12 Q3 12 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314* Q414* Q115* The model for loan success rates explains less of the variance in success rates than the model for overdraft success rates. This is reflected in the differences between actual and predicted success rates with some quarters (Q and Q3 2014) reporting quite different success rates to those predicted. Base : All interviews to Q All respondents who have had response from bank From Q /215/158/168/136 SMALL BASE interim data 72

73 Getting a loan or overdraft is typically a low effort experience, unless the facility was granted after issues Time taken to put agreed Type 1 funding in place All applying Q214-Q315 and asked question 68% 17% 8% 4% 3% All successful overdraft applicants / renewals 41% 21% 13% 14% 11% All successful loan applicants / renewals 96% of successful overdraft applicants and 86% of successful loan applicants said funds were made available in good time (Q2 14-Q3 15) Those waiting more than a month were less likely to agree. Within 1 week 2 weeks 3-4 weeks 1-2 months 3 months or not yet in place 72% of successful Type 1 overdraft applicants asked the question described the process as low effort. 12% described it has high effort 57% of the equivalent loan applicants described the process as low effort. 22% described it has high effort Those who had their facility after issues were less likely to say this was low effort (overdraft 32%, loan 30%) Those offered what they wanted were more likely to say this was low effort (overdraft 79%, loan 64%) Q101a/b/c and Q196a/b/c Base : All successful Type 1 overdraft and loan applicants Q214-Q /638 73