Meet the permanent non-borrowers. They’re the businesses that won’t be borrowing money from external sources, such as the high street banks, to expand.
You might argue that it’s one of the longer-lasting effects of the global crash. Whatever the cause, a majority of small and medium-sized enterprises now meet the definition of permanent non-borrowers (PNBs), according to the recently published BDRC Continental SME Finance Monitor for the first quarter of 2015.
It said that 48% of SMEs met the definition of a permanent non-borrower. But that’s a majority because only 36% of small firms were using external finance in Q1 2015.
The smallest outfits, the one-man or woman bands who don’t employee anyone else, are more likely to be PNBs. It doesn’t appear to mean that they are putting their own money in to keep business afloat. With more SMEs reporting they are trading profitably, the figures for the number of business people feeling they have to inject their own money into their business are continuing to fall.
And the non-PNBs have begun to borrow in growing numbers, the report finds. It said: ‘Once the PNBs are excluded, 70% of remaining SMEs use external finance and this has increased steadily during 2014 (it was 63% in Q1 2014) back to levels previously seen in 2013.’
So that’s some good news for the banks, which have to lend to make money from their customers. But it suggests a level of caution about borrowing that might mean fewer small firms leave a trail of bad debts in the years ahead.
Another statistic in the report introduces us to the ‘happy non-seekers’ of finance. It says: ‘The proportion of all SMEs that are happy non-seekers increased steadily over time, from 68% of SMEs in 2012 as a whole to 79% by the end of 2013, and has remained around this level since then (79% in Q1 2015).’
The report is, by the way, worth reading for what it reveals about the growing awareness of crowd-funding as a source of finance for SMEs. You can download it here.
As ever SJ Collections stand ready to offer help and advice to companies in managing their credit or faced with pursuing unpaid accounts.