The Scottish Mail on Sunday

Non-borrowers ‘mask steady growth trend’

- Vicki Owen

A HARD core of companies that do not want to borrow money are masking the growth in finance for smaller firms, according to the latest analysis.

About 49 per cent of firms are found to be ‘permanent nonborrowe­rs’ – companies that have not borrowed in the past five years and have no plans to do so in the near future – according to the research group BDRC Continenta­l.

Once these are excluded from calculatio­ns, research shows that borrowing and access to funding is steadily improving among smaller companies.

The vast majority (84 per cent) of small firms that applied for an overdraft facility in the 18 months to June 2015 were approved, according to the researcher’s SME Finance Monitor. There has been a particular improvemen­t among the smallest firms and those considered to be higher risk.

But the permanent nonborrowe­rs, while financiall­y stronger on paper, showed less ambition than others. Shiona Davies, a director at BDRC, said: ‘The permanent nonborrowe­rs are an interestin­g group. Our new analysis shows them to be profitable, hold credit balances and to be almost as likely to have grown as their peers.

‘But they appear less likely to be internatio­nal, to have been innovative or be planning to grow in the coming year.’

The research, based on interviews with 5,000 smaller UK firms, reported that 80 per cent said they were profitable. However, the cautious nonborrowe­rs were even more likely to be making a profit.

Most did not expect to grow in the next 12 months, though their recent record shows they have on average grown almost as fast as those companies which had borrowed cash.

About 38 per cent of nonborrowi­ng firms had grown in the past 12 months compared with 42 per cent of companies that had taken some form of outside funding.

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