Access to finance for SMEs – problem or not?

Cindy Condon

Is access to finance for small and medium-sized Enterprises a problem or not? Cindy Condon,  Local Business Manager with HSBC investigates this issue in her latest column for the Weston & North Somerset Echo.
Finance and access to finance for Small and Medium-sized Enterprises (SMEs) continues to attract attention, excite debat and generate different opinions – which are often anecdotal.

Is there a problem or not?

By ‘access to finance’ I mean the availability and cost of finance. So is there a problem or not…?

According to the independent SME Finance Monitor quarterly survey, the overwhelming number of SMEs looking for overdraft or loan finance are successful.

The survey shows that demand for finance is continuing to fall but banks continue to have funds available to lend to businesses with a viable plan, a good track-record and an existing relationship with their bank.

However, the research also shows that uncertainty about the economic climate is putting increasing numbers of business off applying.

External finance

Over time, small firms have become less dependent on external conventional bank finance – only 50% of SMEs use external finance compared with nearly 80% some years ago – and there appears to be little evidence of a shortage in lending supply.

At HSBC, we have made a commitment to lend more to SMEs than we did in 2011. We are on track to do so – we provided £3.1bn of gross lending to UK SMEs in the first three months of 2012, an increase close to 7% on the same period in 2011.

We also launched HSBC’s International SME Fund at the start of the year and have lent more than £1.3bn in the first quarter to SMEs that trade or aspire to trade internationally.

So, if the evidence suggests that access to finance is not an issue for most small and medium sized businesses even in today’s economic climate, why is it still regarded a problem?

Rapid growth of bank lending

In the mid 1990s, bank lending to UK businesses grew at a rapid rate. The most buoyant period was in the five years immediately before the financial crisis. Since 2008 we have returned to a more sustainable state of lending where risk and affordability is at the centre of any decision.

I would summarise by making the following points.

Banks really are open for business, so don’t be discouraged by what you read and hear.

To help you prepare to approach your bank and understand what they are looking for, download our Guide to Business Borrowing ( or ask for the leaflet in your local branch.

Turned down

If you have been turned down and you feel you have a good case, you can and should appeal. All the major banks operate a SME lending appeals process and details of HSBC’s are also explained in our Guide to Business borrowing.

To find out more about lending to small businesses or any of HSBC’s services please visit: