SME Borrowing to Surge in 2017, and this is a Good Thing

Thinking about borrowing in 2017

  • UK SME borrowing to soar above £50bn in 2017
  • 2017 borrowing could see 22% year on year increase

The latest Zurich SME Risk Index shows that British small and medium-sized businesses (SMEs) are planning on borrowing an average of £41,770 in 2017.

This would mark an increase of 22% compared with 2016, when small businesses borrowed on average just £34,375.

As a result, should the number of businesses that borrow in 2017 be consistent with levels recorded in 2016, overall lending to SMEs could soar above £50bn this coming year.

The survey of over 1,000 SME owners and decision makers showed that, of those intending to borrow money this coming year, 38% intend to borrow £100,000 or more, while 25% plan to borrow more than £250,000.

2% of SMEs in the UK are planning to borrow more than £1,000,000, which could total more than 100,000 businesses nationwide.

Most commonly, SME owners secured loans against their business in 2016.

12% ave taken a loan out against their own commercial premises and 9% against their business’ equipment, while business invoices and equity stakes were used by a combined 14% of business owners in 2016.

Of those that took out loans in 2016, 12% secured their loan against their own residential property and 5% took out a loan against collateral belonging to friends and family.

27% do not know the source of their security.

UK Businesses Love Debt

The statistics show that many businesses are habitual borrowers. Of those that have taken out loans in the past ten years (30% of the total asked), 18% have taken out more than one loan and a staggering 5% have taken out five of more.

Despite this, the survey suggests that many business owners who borrow habitually are doing so sustainably.

78% of those who have taken out five or more loans in the last ten years has a net revenue of more than £1 million, while nearly two in five has a net revenue of more than £10 million, indicating that they are using strong revenue streams to service their debts effectively.

Most encouraging of all is that most businesses have reported self-sufficiency, stating that they have no need to borrow at all.

65% did not borrow anything in 2016 and 64% intend not to in 2017.

55% of small and medium-sized business owners have not taken out a single loan in the last ten years.

Anne Griffiths, Head of SME Proposition at Zurich, comments:

“£50 billion in borrowed money is an enormous sum, and in uncertain times like these, businesses must make sure they have a solid business plan and support in place to service their loans while staying profitable.”

“Borrowing can often be indicative of confidence, and increased investment in talent, equipment and business premises for growth may be one of the most encouraging economic indicators of all. The business landscape appears rife with uncertainty, but SMEs have long been the building blocks of this economy and as long as they are building themselves sensibly, sustainably, with contingencies in place, then the UK can be confident in the health of its economy.”