Solving the SME finance puzzle: an examination of demand and supply failure in the UK

Figures & data

Table 1. Types of finance accessed and success rates in the last 12 months.

Type of Finance (n=2883) Row %	Obtained (a)	Progress (b)	Unsuccessful (c)	Success rate a/(a+c)	% of seekers
Bank overdraft	35	2	6	85	43
Loans	31	4	8	79	43
Commercial mortgage	7	2	2	78	11
Credit cards	20	1	1	95	22
Factoring	7	1	1	87	9
Leasing/HP	33	1	1	97	35
P2P	2	1	1	67	4
Equity	4	1	1	80	6
Public equity	0.4	0	0.1	80	1
Mezzanine	1	0	0.2	83	1
Trust/private grant	5	1	1	87	7
Government scheme	3	0	0.3	90	3
Personal finance	1	0	0.1	90	1
Other	4	1	1	80	6
Total	83	11	6	93	100

Table 2. Access to finance – success rates and discouragement by business and management characteristics.

Characteristic (n=2883) Row %	Obtained	Not	Other	Success rate	n	Discouraged Row% (n=15002)
Employment size
Self employed/zero employee	72***	14	15	84	446	8
1–9 employees	79	9	12	90	699	11***
10–49 employees	86	4	10	96	909	10
50–249 employees	91	1	8	99	829	8
Broad sector (SIC2007)
Primary	90	1	9	99	165	10
Manufacturing	87	3	9	97	350	10
Construction	82	9	9	90	248	10
Wholesale/Retail	88	3	9	97	411	9
Transport	83	7	10	93	137	7
Accommodation/Food	73**	10	17	88	184	11
Infocomms	81	10	8	89	144	11
Finance/Real estate	81	7	13	92	88	6
Professional	84	7	9	92	327	7
Administration	84	7	9	92	205	8
Education	78	6	16	93	109	8
Health	79	7	14	92	316	12
Arts	86	1	13	99	94	11
Other services	76	7	17	92	105	11
Establishment age of business
0–5 years	77***	10	13	89	379	14***
6–10 years	78	9	13	90	357	10
11–20 years	84	6	11	93	457	9
20+ years	86	4	10	96	1685	8
Government Office Regions
East Midlands	87	4	9	96	220	9
East of England	89	3	8	97	305	9
London	79	9	12	90	343	11
North East	70*	8	11	90	89	8
North West	85	5	10	94	253	10
South East	81	8	11	90	463	9
South West	85	5	11	94	359	8
West Midlands	85	6	9	93	208	8
Yorkshire and Humber	84	4	12	95	206	8
Scotland	84	4	12	95	229	10
Wales	77	5	18	94	99	10
Northern Ireland	79	7	14	92	109	12
Urban/Rural/Deprived location
Urban	83	6	11	93	2027	9
Rural	85	5	11	94	849	9
15% most deprived areas	83	7	11	92	372	10
Management characteristics/capabilities
Family led	84	7	10	92	1747	9
Women led	80	7	12	92	547	10
Minority Ethnic led	81	8	11	90	150	16***
Number of Partners
No partners/directors	79**	5	16	94	325	11***
1–2 partners/directors	82	7	11	92	1505	9
3+ partners/directors	88	3	9	97	1018	9
Capabilities to access finance
Capabilities access finance good+	90***	2	8	98	1515	7***
Capabilities access finance average	83	4	13	95	656	12
Capabilities access finance poor-	67	15	18	82	542	17
Used external finance advice/support	78*	8	14	91	167	20***
Additional indicators
Business Plan
Business Plan kept up to date	84	5	11	95	1458	10***
Business Plan not kept up to date	81	8	11	92	254	14
No Business Plan	83	7	10	93	1134	8
Introduction of an innovation in terms of product/service/process	83	6	11	94	1451	12***
Improved process for producing/supplying goods/services	84	5	11	95	945	13***
Last 12 months turnover
Increased	86**	5	9	95	1279	9***
Decreased	81	7	12	93	498	13
Same	81	6	12	94	978	8
Future turnover expectations
Increase	85***	5	10	95	1545	11***
Decrease	79	8	14	92	250	9
Same	82	7	11	93	1023	8
Last 12 months employment
Increased	82***	5	13	95	417	14***
Decreased	81	7	12	93	1459	10
Same	88	3	8	97	962	8
Future employment expectations
Increase	85***	4	11	95	1121	12***
Decrease	82	7	11	93	1528	13
Same	83	7	10	93	219	8

Significance: *<.05; **<.01; ***<.001.

Table 3. Obtained at least some external finance in the last 12 months.

Obtained at least some external finance	Basic Model			Business Plan Model			Innovation Model			Growth Model
	B	S.E.	Exp(B)	B	S.E.	Exp(B)	B	S.E.	Exp(B)	B	S.E.	Exp(B)
Use of external information/advice	−0.380	0.232	0.684	−0.375	0.235	0.688	−0.367	0.233	0.693	−0.388	0.253	0.678
Number of partners/directors
Number of partners (0)	0.210	0.312	1.234	0.240	0.317	1.272	0.225	0.313	1.253	0.241	0.327	1.272
Number of partners (1–2)	−0.114	0.205	0.892	−0.135	0.206	0.874	−0.101	0.205	0.904	−0.193	0.216	0.825
Capabilities to access external finance
Capabilities poor-	−1.131****	0.212	0.323	−1.158***	0.215	0.314	−1.153****	0.214	0.316	−1.271****	0.226	0.281
Capabilities average	−0.700***	0.203	0.496	−0.726***	0.204	0.484	−0.728****	0.204	0.483	−0.747****	0.217	0.474
Regions
Midlands	−0.261	0.556	0.770	−0.265	0.557	0.767	−0.291	0.555	0.748	−1.092	0.790	0.336
South	−0.425	0.522	0.654	−0.436	0.523	0.647	−0.441	0.520	0.644	−1.266*	0.763	0.282
London	−0.696	0.555	0.499	−0.704	0.557	0.495	−0.698	0.555	0.498	−1.614**	0.790	0.199
North	−0.607	0.528	0.545	−0.584	0.530	0.558	−0.626	0.527	0.535	−1.475*	0.767	0.229
Scotland	−0.227	0.586	0.797	−0.264	0.587	0.768	−0.237	0.585	0.789	−1.213	0.814	0.297
Wales	−0.902	0.636	0.406	−0.932	0.639	0.394	−0.925	0.634	0.397	−2.003**	0.851	0.135
Family Business	−0.189	0.207	0.828	−0.190	0.209	0.827	−0.205	0.208	0.814	−0.146	0.218	0.865
Number of employees
Number of employees (0)	−1.247****	0.296	0.287	−1.292***	0.300	0.275	−1.305****	0.298	0.271	−1.031***	0.340	0.357
Number of employees (1–9)	−0.4756*	0.258	0.622	−0.519**	0.263	0.595	−0.513**	0.259	0.599	−0.334	0.285	0.716
Number of employees (10–49)	−0.406*	0.227	0.666	−0.448	0.229	0.639*	−0.422*	0.227	0.656	−0.335	0.241	0.715
Sector
Sector (Primary)	0.277	0.589	1.319	0.311	0.591	1.365	0.354	0.594	1.425	0.071	0.629	1.073
Sector (Manufacturing)	0.035	0.529	1.036	0.025	0.531	1.025	0.040	0.530	1.041	−0.299	0.570	0.742
Sector (Construction)	−0.124	0.549	0.884	−0.073	0.551	0.930	−0.062	0.554	0.940	−0.411	0.587	0.663
Sector (Wholesale/Retail)	0.238	0.530	1.269	0.247	0.532	1.281	0.262	0.535	1.299	−0.010	0.573	0.990
Sector (Transport)	−0.566	0.645	0.568	−0.584	0.649	0.557	−0.489	0.652	0.613	−0.732	0.682	0.481
Sector (Accommodation/Food)	−1.089**	0.531	0.337	−1.116**	0.532	0.328	−1.083**	0.535	0.338	−1.224**	0.579	0.294
Sector (Infocomms)	−0.057	0.558	0.944	0.011	0.559	1.011	−0.068	0.560	0.934	−0.201	0.607	0.818
Sector (Finance/Real State)	−0.463	0.583	0.630	−0.419	0.584	0.658	−0.421	0.586	0.656	−0.593	0.631	0.552
Sector (Professional)	0.157	0.507	1.170	0.223	0.510	1.250	0.211	0.510	1.235	0.020	0.552	1.020
Sector (Administration)	−0.319	0.539	0.727	−0.287	0.540	0.750	−0.291	0.541	0.748	−0.188	0.599	0.828
Sector (Education)	−0.784	0.565	0.457	−0.795	0.566	0.452	−0.760	0.568	0.468	−1.107*	0.603	0.331
Sector (Health)	−0.633	0.491	0.531	−0.587	0.492	0.556	−0.650	0.493	0.522	−0.822	0.532	0.439
Sector (Arts)	0.761	0.771	2.141	0.820	0.774	2.271	0.736	0.774	2.088	0.664	0.807	1.942
Age of business
Age of business (0–5 years)	0.349	0.265	1.417	0.337	0.267	1.401	0.357	0.266	1.429	0.208	0.298	1.232
Age of business (6–10 years)	−0.120	0.256	0.887	−0.124	0.260	0.884	−0.124	0.258	0.884	−0.158	0.276	0.853
Age of business (11–20 years)	−0.139	0.237	0.871	−0.194	0.238	0.824	−0.153	0.238	0.858	−0.125	0.249	0.883
Broad urban/rural categorisation from postcode	−0.256	0.208	0.774	−0.240	0.210	0.787	−0.263	0.208	0.768	−0.277	0.218	0.758
Businesses located in the most deprived 15% of the country	0.032	0.267	1.033	0.069	0.270	1.072	0.054	0.268	1.056	0.029	0.286	1.029
Whether business is women-led	0.153	0.211	1.166	0.096	0.215	1.100	0.137	0.211	1.147	0.216	0.223	1.241
Whether business is MEG-led	0.380	0.316	1.463	0.376	0.317	1.456	0.369	0.317	1.446	0.337	0.334	1.401
Constant	2.946****	1.110	19.031	3.025***	1.128	20.612	2.946***	1.122	19.042	4.288****	1.326	72.818
Do you have a formal written business plan?	-	-	-				-	-	-	-	-	-
Yes – Kept up to date	-	-	-	−0.087	0.192	0.917	-	-	-	-	-	-
Yes – But not kept up to date	-	-	-	0.467	0.332	1.595	-	-	-	-	-	-
Introduction of an innovation in terms of product/service/process	-	-	-	-	-	-	−0.260	0.181	1.340	-	-	-
Process Innovation	-	-	-	-	-	-	2.947	1.122	0.771	-	-	-
Past Turnover Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	−0.047	0.271	0.954
Decreased	-	-	-	-	-	-	-	-	-	−0.360*	0.205	0.698
Future Turnover Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	−0.212	0.317	0.809
Decrease	-	-	-	-	-	-	-	-	-	−0.182	0.207	0.833
Past Employment Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	−0.363	0.269	0.696
Decreased	-	-	-	-	-	-	-	-	-	0.000	0.302	1.000
Future Employment Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	0.162	0.209	1.175
Decreased	-	-	-	-	-	-	-	-	-	0.250	0.383	1.284
−2LL	993.12			980.154			989.717			907.413
	χ2 = 107, df = 35, p < 0.001			χ2 = 108, df = 37, p < 0.001			χ2 = 110, df = 37, p < 0.001			χ2 = 125, df = 43, p < 0.001
Nagelkerke R^2	13.80%			14.10%			14.20%			16.90%
Hosmer & Lemeshow test	p = 0.720			p = 0.622			p = 0.316			p = 0.716
Classification accuracy	85.60%			85.50%			85.50%			85.90%

**** p < 0.001.

***p < 0.01.

**p < 0.05.

*p < 0.1.

Table 4. Correlation matrix.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)	(14)	(15)	(16)	(17)	(18)	(19)	(20)
(1) Obtained
(2) Discouraged	0.085****
(3) Use of external information/advice	−0.069***	−0.064****
(4) Number of partners/directors	0.086****	0.023**	0.022
(5) Capabilities to access external finance	0.236****	0.138	0.039	0.0121****
(6) Regions	0.068*	0.037***	0.035	0.039****	0.034**
(7) Family Business	−0.005	−0.016*	0.025	0.581****	0.0108****	0.086****
(8) Number of employees	0.176****	0.047****	0.033	0.296****	0.0188****	0.034***	0.320****
(9) Sector	0.119****	0.059****	0.057	0.220****	0.099****	0.087****	0.246****	0.219****
(10) Age of business	0.098****	0.068****	0.034	0.0118****	0.087****	0.037****	0.056****	0.117****	0.110****
(11) Broad urban/rural categorisation from postcode	0.021	−0.003	0.016	0.048****	0.022*	0.261****	−0.116****	0.090****	0.266****	0.047****
(12) Businesses located in the most deprived 15% of the country	0.006	0.013	−0.01	0.039****	0.024**	0.241****	−0.045****	0.074****	0.097****	0.014	0.188****
(13) Whether business is women-led	0.04**	0.012	−0.03	0.238****	0.022*	0.009	−0.05****	0.047****	0.286****	0.033***	0.010	0.008
(14) Whether business is MEG-led	0.017	0.053****	−0.016	0.091****	0.039****	0.183****	0.055****	0.016	0.095****	0.081****	0.091****	0.050****	−0.16**
(15) Do you have a formal written business plan?	0.021	0.055****	0.051****	0.0184****	0.0133****	0.033****	0.261****	0.286****	0.173****	0.081****	0.056****	0.031****	0.044****	0.018*
(16) Introduction of an innovation in terms of product/service/process	0.004	−0.083****	0.039***	0.068****	0.035****	0.021	0.076****	0.110****	0.201****	0.045****	−0.024***	−0.015*	0.015*	−0.015*	0.178****
(17) Process Innovation	0.011	−0.07****	0.02	0.103****	0.032****	0.034***	0.074****	0.165****	0.158****	0.024**	−0.022***	−0.016**	0.019**	−0.020**	0.185****	0.375****
(18) Past Turnover Growth	0.065***	0.067****	0.033*	0.065****	0.069****	0.045****	0.065****	0.145****	0.088****	0.076****	0.016	0.013	0.035****	0.014	0.102****	0.145****	0.136****
(19) Future Turnover Growth	0.059***	0.054****	0.042***	0.058****	0.054****	0.039****	0.046****	0.130****	0.103****	0.104****	0.033****	0.014	0.036****	0.027***	0.114****	0.174****	0.151****	0.265****
(20) Past Employment Growth	0.092****	0.062****	0.024	0.138****	0.070****	0.029****	0.157****	0.327****	0.100****	0.045****	0.057****	0.040****	0.037****	0.007	0.162****	0.140****	0.149****	0.231****	0.171****
(21) Future Employment Growth	0.029	0.070****	0.050****	0.105****	0.035****	0.048****	0.118****	0.219****	0.111****	0.087****	0.062****	0.027***	0.035****	0.046****	0.156****	0.172****	0.165****	0.180****	0.243****	0.304****

**** p < 0.001.

***p < 0.01.

**p < 0.05.

*p < 0.1.

Table 5. Discouraged from applying for external finance in last 12 months.

Discourage	Basic Model			Business Plan Model			Innovation Model			Growth Model
	B	S.E.	Exp(B)	B	S.E.	Exp(B)	B	S.E.	Exp(B)	B	S.E.	Exp(B)
Use of external information/advice	0.482***	0.155	1.620	0.456***	0.156	1.578	0.453***	0.156	1.574	0.433***	0.166	1.542
Number of partners/directors
Number of partners (0)	0.043	0.178	1.044	0.018	0.181	1.019	0.067	0.179	1.069	0.035	0.185	1.036
Number of partners (1–2)	−0.197	0.119	0.821	0.199*	0.119	0.820	−0.189	0.119	0.828	−0.143	0.124	0.867
Capabilities to access external finance
Capabilities poor-	0.969****	0.118	2.634	0.978****	0.119	2.660	0.935****	0.119	2.548	0.989****	0.123	2.687
Capabilities average	0.603****	0.118	1.827	0.618****	0.119	1.855	0.597****	0.118	1.818	0.571****	0.123	1.770
Regions
Midlands	−0.276	0.297	0.759	−0.271	0.298	0.763	−0.313	0.299	0.731	−0.400	0.316	0.670
South	−0.035	0.276	0.965	−0.050	0.277	0.951	−0.070	0.277	0.932	−0.139	0.294	0.870
London	0.260	0.296	1.296	0.258	0.297	1.295	0.225	0.297	1.253	0.115	0.315	1.122
North	0.081	0.282	1.084	0.096	0.282	1.101	0.066	0.283	1.068	−0.028	0.300	0.973
Scotland	0.016	0.313	1.016	0.009	0.314	1.009	−0.025	0.314	0.975	−0.193	0.336	0.825
Wales	0.110	0.353	1.117	0.112	0.354	1.118	0.060	0.355	1.061	−0.151	0.378	0.860
Family Business	0.035	0.122	1.036	0.014	0.123	1.014	0.003	0.123	1.003	0.126	0.126	1.134
Number of employees
Number of employees (0)	0.157	0.175	1.170	0.210	0.180	1.234	0.219	0.177	1.245	0.153	0.201	1.167
Number of employees (1–9)	0.386***	0.150	1.471	0.411***	0.153	1.508	0.413***	0.151	1.512	0.303*	0.163	1.354
Number of employees (10–49)	0.393***	0.135	1.481	0.405***	0.137	1.500	0.423***	0.136	1.526	0.413***	0.140	1.511
Sector
Sector (Primary)	−0.262	0.323	0.770	−0.227	0.330	0.797	−0.110	0.326	0.896	0.261	0.337	0.770
Sector (Manufacturing)	−0.394	0.274	0.675	−0.330	0.277	0.719	−0.421	0.275	0.656	−0.513*	0.280	0.599
Sector (Construction)	−0.129	0.277	0.879	−0.039	0.281	0.961	0.007	0.280	1.007	−0.116	0.285	0.890
Sector (Wholesale/Retail)	−0.061	0.253	0.940	−0.008	0.258	0.992	0.015	0.255	1.015	−0.145	0.261	0.865
Sector (Transport)	−0.760*	0.434	0.468	−0.713	0.437	0.490	−0.601	0.437	0.548	−0.850	0.461	0.427
Sector (Accommodation/Food)	−0.176	0.291	0.839	−0.171	0.296	0.843	−0.047	0.294	0.954	−0.113	0.299	0.893
Sector (Infocomms)	−0.305	0.283	0.737	−0.269	0.286	0.764	−0.381	0.284	0.683	−0.402	0.293	0.669
Sector (Finance/Real State)	−0.585*	0.322	0.557	−0.544	0.325	0.580	−0.470	0.325	0.625	−0.514	0.327	0.598
Sector (Professional)	−0.554**	0.254	0.575	−0.505**	0.257	0.604	−0.527**	0.255	0.590	−0.612**	0.260	0.542
Sector (Administration)	−0.426	0.282	0.653	−0.372	0.285	0.690	−0.329	0.285	0.719	−0.562*	0.292	0.570
Sector (Education)	−0.494	0.306	0.610	−0.472	0.309	0.624	−0.440	0.307	0.644	−0.541*	0.319	0.583
Sector (Health)	0.023	0.250	1.024	0.018	0.254	1.018	0.060	0.252	1.062	−0.041	0.256	0.960
Sector (Arts)	−0.124	0.332	0.883	−0.093	0.335	0.911	−0.069	0.334	0.933	−0.111	0.337	0.895
Age of business
Age of business (0–5 years)	0.511****	0.139	1.666	0.485****	0.140	1.626	0.471****	0.140	1.601	0.587****	0.155	1.798
Age of business (6–10 years)	0.206	0.149	1.228	0.191	0.150	1.211	0.161	0.150	1.175	0.228	0.156	1.256
Age of business (11–20 years)	0.202	0.134	1.224	0.193	0.135	1.213	0.180	0.134	1.197	0.185	0.139	1.203
Broad urban/rural categorisation from postcode	0.087	0.118	1.091	0.091	0.119	1.096	0.081	0.118	1.085	0.157	0.123	1.170
Businesses located in the most deprived 15% of the country	0.105	0.160	1.111	0.097	0.160	1.102	0.141	0.161	1.152	0.092	0.166	1.096
Whether business is women-led	−0.157	0.121	0.855	0.178	0.122	0.837	−0.186	0.122	0.830	−0.198	0.127	0.820
Whether business is MEG-led	−0.623****	0.187	0.536	−0.616****	0.188	0.540	−0.591***	0.189	0.554	−0.582***	0.198	0.559
Constant	−1.229*	0.645	0.293	1.372**	0.657	0.253	−1.695***	0.654	0.184	−0.799	0.696	0.450
Do you have a formal written business plan?	-	-	-				-	-	-	-	-	-
Yes – Kept up to date	-	-	-	0.210*	0.113	1.234	-	-	-	-	-	-
Yes – But not kept up to date	-	-	-	0.415***	0.161	1.514	-	-	-	-	-	-
Introduction of an innovation in terms of product/service/process	-	-	-	-	-	-	0.529****	0.109	1.698	-	-	-
Process Innovation	-	-	-	-	-	-	0.206**	0.104	1.229	-	-	-
Past Turnover Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	0.228	0.146	1.256
Decreased	-	-	-	-	-	-	-	-	-	−0.127	0.121	0.881
Future Turnover Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	−0.171	0.188	0.843
Decrease	-	-	-	-	-	-	-	-	-	−0.185	0.118	0.831
Past Employment Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	−0.291**	0.148	0.748
Decreased	-	-	-	-	-	-	-	-	-	−0.360**	0.166	0.698
Future Employment Growth	-	-	-	-	-	-	-	-	-
Same	-	-	-	-	-	-	-	-	-	−0.272**	0.119	0.762
Decreased	-	-	-	-	-	-	-	-	-	0.161	0.193	1.174
−2LL	3018.862			2974.923			2980.177			2774.596
	χ2 = 180, df = 35, p < 0.001			χ2 = 187, df = 37, p < 0.001			χ2 = 218, df = 37, p < 0.001			χ2 = 207, df = 43, p < 0.001
Nagelkerke R^2	8.00%			8.40%			9.60%			9.80%
Hosmer & Lemeshow test	p = 0.693			p = 0.113			p = 0.561			p = 0.482
Classification accuracy	86.30%			86.30%			86.20%			86.70%

**** p < 0.001.

***p < 0.01.

**p < 0.05.

*p < 0.1.

Figure 1. Conceptualising a holistic approach to supply and demand side of SME finance.