sme loan guarantee scheme recipient and comparison group survey results-uk-2010

8/14/2019 SME Loan Guarantee Scheme Recipient and Comparison Group Survey Results-UK-2010

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Department for Business, Innovation & Skills (BIS)

Small Firms Loan Guarantee (SFLG) Scheme Recipientand Comparison Group Survey Results

January 2010URN 10/511

OMB Research Endeavour House 259 Forstal Road Aylesford Kent ME20 7APT. 01622 790900 E. [email protected] W. www.ombresearch.co.uk


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Contents

1. Introduction ......................................................................................................1

2. Research Objectives ....................................................................................... 1

3. Summary Of Key Findings .............................................................................. 23.1 Usage & Awareness Of SFLG ................................................................... 23.2 Experiences Of SFLG ................................................................................33.3 Benefits Of SFLG To Firms ....................................................................... 33.4 Benefits Of SFLG To Economy ................................................................. 4

4. Methodology .................................................................................................... 54.1 Sample Groups .......................................................................................... 74.2 Sample Groups For Analysis .....................................................................9

5. Profile ............................................................................................................ 105.1 Age Of Business ...................................................................................... 105.2 Size Of Business ..................................................................................... 115.3 Legal Status Of Business ........................................................................ 125.4 Industry Sector .........................................................................................135.5 Region ......................................................................................................145.6 Annual Turnover ...................................................................................... 165.7 Management Profile .................................................................................175.8 Export Experience ................................................................................... 215.9 Strategic Direction Of The Business ........................................................22

5.10 Customers ..............................................................................................275.11 Competitors ............................................................................................285.12 Innovation .............................................................................................. 32

6. Usage of Finance .......................................................................................... 356.1 The Finance-Seeking Process ................................................................ 356.2 The SFLG/Loan Application .................................................................... 446.3 Satisfaction With Bank Service Aspects ..................................................486.4 Sources Of External Advice Used ........................................................... 546.5 Further Finance Applications Since Obtaining SFLG Loan .....................57

7. Impacts & Outcomes ..................................................................................... 59

7.1 Specific Impacts .......................................................................................597.2 Additionality ..............................................................................................707.3 Other Benefits Of SFLG To Firms ........................................................... 83


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1. Introduction

This summary outlines the key findings from the Small Firms Loan Guarantee(SFLG) Scheme Value for Money Survey. The data and findings from this survey willbe used as the main primary research that will inform a wider value for money

evaluation of SFLG. The wider study is being conducted by the Institute forEmployment Studies (IES)1. The specific objective of this wider study is to form anoverall assessment of the value for money provided by SFLG, drawing on theoutcomes of the early assessment and additional primary research and secondaryanalysis of existing datasets on areas such as customer satisfaction and profiling aswell as the impact and effectiveness of the products.

It is important to note that the figures presented in this report show the observedrelationship between the different variables. Statistical analysis in the wider study willhelp to control for any differences between the SFLG user group and comparisonsamples to allow an assessment of the impact of the programme to be made.

The research was conducted by OMB Research and utilised a telephonemethodology, with all interviews conducted using CATI (Computer AssistedTelephone Interviewing) and lasting an average of around 21 minutes for users and15 minutes for non-users.

2. Research Objectives

The main objectives of this particular study are to discover:

How the characteristics of businesses using SFLG differ from thegeneral SME population/ firms seeking debt finance;

The extent to which businesses are aware of SFLG;

How SFLG is being used;

The experiences of businesses using SFLG;

How SFLG has benefited firms; and

The extent to which SFLG is leading to additional benefits to theeconomy.

1 Cowling Economic Evaluation of the Small Firms Loan Guarantee (SFLG) Scheme (2010) Institutefor Employment Studies.


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3. Summary Of Key Findings

3.1 Usage & Awareness Of SFLG

The SFLG scheme appears to be an important first step in financing businesses, aswell as the only source of finance available. This is evidenced by the findingsthat:

The SFLG loan application was the first application that four-fifths (80%) of SFLGuser businesses had made to any source for their project;

Three-quarters (76%) claimed there were no other sources of finance available tothem.

The SFLG scheme is often part of a package of external advice and support. Two-fifths (40%) of SFLG users claimed to have used other external sources ofinformation, help or advice to assist with their business development in the last2 years, compared to a third (33%) of non-users who had obtained a loan andonly a fifth (19%) of non-users as a whole.

The main use of the SFLG guaranteed loan is for business start-up purposes (52%),while non-users of SFLG who had obtained a loan were most likely to needthe loan to purchase an asset (39%).

The profile of SFLG user companies in terms of women-led and ethnic minority-ledfirms is similar to the general SME population. However, there may be someevidence to suggest that SFLG guaranteed loan take-up is perhaps slightlyhigher in deprived areas compared to the take-up of normal loans (althoughthis is not statistically significant).

Awareness of the SFLG scheme before approaching the bank for finance was quitehigh, with nearly three-fifths (57%) of SFLG users claiming to have beenaware of the scheme before this point. This compares to only 23% of non-users who had obtained a loan.


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3.2 Experiences Of SFLG

Overall satisfaction with the total experience of receiving a loan guaranteed by theSFLG scheme was high, with 46% very satisfied and a further 34% fairlysatisfied. Furthermore:

Nearly two-thirds (65%) of SFLG users rated the banks help with their application asgood or very good, compared to just over half (52%) of non-users who hadobtained a normal loan;

The large majority (76%) of SFLG users did not receive help with their business planfrom the bank however of those that did, most rated it as good or very good.

SFLG loans appear to take slightly longer to access than normal bank loans 46% ofSFLG users received a decision on their loan from the bank within a week,compared to 69% of non-users who had obtained a normal loan.

3.3 Benefits Of SFLG To Firms

The SFLG scheme appears to have provided user businesses with a number ofpositive benefits:

Firms receiving a loan through SFLG scheme appear to have experienced strongeremployment and turnover growth than non-users obtaining a normal loan andnon-users as a whole;

Three-quarters (76%) of SFLG users indicated that they would now be moreconfident in their ability to source external finance as a direct result of theirexperiences of receiving a SFLG loan;

SFLG users and non-users who obtained a normal loan generally experiencedsimilar benefits in terms of innovation and business performance measures.However, SFLG users were more likely to have experienced benefits relatingto provision of capital, most notably being provided with the capital to getstarted (36% compared to 4% of non-users) and being provided with capitalfor premises (20% and 13% respectively). This is probably largely explainedby differences in the main reasons for seeking finance as SFLG users weremuch more likely to have been looking for start-up finance whereas non-userswere more likely to be seeking finance for an asset.

More than two-fifths (43%) of SFLG users would either probably or definitely have notachieved similar results without the SFLG guaranteed loan, compared to aslightly smaller proportion of non-users who had obtained a loan (38%);


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Around half (49%) of SFLG users would probably or definitely not have gone aheadwith the project or start-up that the SFLG loan funded in the absence of thisloan. However, non-users who had obtained a non-SFLG loan were morelikely to feel that they would definitely or probably not gone ahead without thefinance they received (65%);

More than four-fifths (81%) of SFLG users believed that the SFLG guaranteed loanwould have either a fairly or very positive influence on the growth prospects oftheir company over the next 2 years, compared to a similar proportion of non-users who had obtained a loan (78%);

3.4 Benefits Of SFLG To Economy

The SFLG scheme appears to lead to some wider positive impacts on the economyas a whole:

Nearly two-thirds (63%).of SFLG users had introduced either new or significantlyimproved products or services in the last 2 years, a similar proportion as fornon-users who had obtained a loan. However, SFLG users were slightly morelikely to have introduced new or significantly improved processes (44%,compared to 37% of non-users who obtained a loan).

Furthermore, SFLG users were more likely to use cutting-edge technologies in theirbusinesses (41%) compared to non-users who obtained a loan (18%) andnon-users as a whole (26%).


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4. Methodology

The research was conducted by OMB Research Ltd. via telephone interviews withfirms who had received a SFLG loan in 2006 and also with a matched sample of non-

users of SFLG from the general business population. The non-user sample wasmatched in terms of business age, legal status of business i.e. whether limited orunlimited and by broad business sector. The limited non-user companies weresourced from FAME whilst the unlimited companies were sourced from Experian.Interviews were administered using CATI (Computer Assisted TelephoneInterviewing) and all telephone fieldwork was conducted at BMG Directs telephonecentre in Birmingham by a team of experienced business-to-business interviewers.

The main fieldwork was conducted during August and September 2008 and theaverage interview duration during fieldwork was around 21 minutes for users and 15minutes for non-users. The main fieldwork was supplemented by a further wave of

fieldwork which took place in December 2008. This additional fieldwork wave wasintended to boost the number of non-user businesses who had obtained a businessbank loan so as to allow more robust sub-analysis of this group. The sample for thisbooster group was sourced from respondents to the Annual Small Business Survey(ASBS). All those who had stated during the ASBS that they had obtained a businessbank loan in the last 12 months and were willing to participate in future BIS researchwere included in the booster sample group.

The questionnaire was fully piloted, both quantitatively and qualitatively, prior to thestart of the main fieldwork. The quantitative pilot was conducted prior to livefieldwork on 5th & 6th August 2008 and was attended by representatives from OMB,IES and BIS. These pilots checked the flow, clarity, relevance and length of thequestionnaire as well as the content.

Whilst the questionnaire included a significant amount of text substitution and routingto ensure that questions were relevant to both SFLG users and non-users, the coreof the questionnaire was kept consistent in order that comparable data could becollected.

The survey was introduced to all respondents as being on behalf of BERR (formerlythe DTI) and this was disclosed in the survey introduction. For SFLG users, the

evaluation was positioned as a study to evaluate firms that have applied for financethrough the SFLG scheme, while for non-users the evaluation was positioned as astudy concerning how businesses raise finance, any problems they face and whetherthe government can provide assistance with this.

All interviews were conducted with senior personnel within each business, mostcommonly the owner or director. The person with whom the interview was conductedvaried from company to company. As the SFLG recipient database did not contain anamed contact (or telephone number) we had to establish at the start of the interviewthe best person to speak to and initially asked for the person who would know mostabout a specific application to the SFLG scheme. For non-users we asked to speak

to the owner, managing director or the person in charge of finance in the business.


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The table below shows the number of sample records available, the number of SFLGbusinesses for whom we were able to source a telephone number for (using bothautomated and manual telephone look-up approaches), the approximate number ofrecords lost due to unusable sample (unobtainable telephone number, duplicaterecords etc.) and the number of interviews completed within each of the sample

groups along with the associated response and refusal rates. Response rates havebeen calculated by dividing the number of completed interviews by the total numberof useable contacts loaded onto CATI.

Table 4.1 Survey Coverage

SFLG Users Non-Users

SAMPLE CLEANING

Total in-scope records provided(guaranteed/repaid)

2,244 -

Telephone number found 1,228 -CATI SCREENING

Selection for CATI 1,228 6,467

Unusable ineligible for interview,business contact details incorrect, numberunobtainable, etc.

341 1,167

ACHIEVED INTERVIEWS/RESPONSE RATE

Total useable sample 887 5,300

Interviews achieved 441 1,049

Response rate (%) 50% 20%

Refusal rate (%) 33% 40%CONFIDENCE INTERVALS

Universe size 2,244 -

95% Confidence interval

(based on worst case scenario of 50%observed)

4% 3%

Statistical Significance

Throughout this report, any differences referred to across sub-analysis groups arestatistically significant at the 95% level of confidence (unless otherwise stated).

Rounding

Throughout this report results are typically presented to the nearest whole number(e.g. 24.7% will be rounded up and displayed as 25%). For this reason there can beapparent discrepancies between the charts/tables and the commentary when severalfigures are combined. For example, values of 8.4% and 15.3% would be shown as8% and 15% respectively in a chart, but the combined value if referred to in thecommentary would be 23.7% and hence displayed as 24%.


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Dont know or Not answered Responses

At the bottom of all charts and figures the proportion of respondents unable toanswer, or deciding that they do not wish to answer a particular question are shown.

These proportions are shown in brackets in the base descriptions for each chart.They are shown separately for each sample group in question. For the majority ofquestions the proportion unable or unwilling to answer a particular question are verylow, but for some questions such as turnover and attributable turnover growth etcthese proportions are larger and as such the chart will not add up to 100%.

4.1 Sample Groups

4.1.1 SFLG Users (i.e. Beneficiaries)

This respondent group were read these descriptions at the start of the interview:

We have been commissioned by the Department for Business, Enterprise andRegulatory Reform (BERR formerly the DTI) to conduct an evaluation of firms thathave applied for finance and according to their records you received a loan that wasguaranteed by the Small Firms Loan Guarantee Scheme (SFLG).

The Small Firms Loan Guarantee is a joint venture between the Department forBusiness, Enterprise and Regulatory Reform (formerly the DTI) and a number ofapproved lenders. The scheme provides a guarantee to encourage banks and otherfinancial institutions to lend money when small firms are unable to raise conventionalfinance for viable projects because of a lack of security or established track record.

Sample Frame:

All firms who received a SFLG loan in 2006 (taking into account the post GrahamReview changes to the scheme)

Exclusions:

Any firm where the status of the loan was anything other than guaranteed orrepaid

Sampling Approach:Random sample amongst firms where telephone contact number could be sourced

(using automated and manual look-up process)

SFLG Users


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4.1.2 Non-Users (i.e. Non-Beneficiaries)

This group of respondents were read the following description at the start of theinterview:

We have been commissioned by the Department for Business, Enterprise andRegulatory Reform (BERR formerly the DTI) to conduct an evaluation of howbusinesses raise finance, any problems they face and whether the government canprovide assistance with this.

To encourage participation, respondents were also read the following after this initial

introduction:

It doesnt matter if your business has not needed to raise finance recently, we arestill interested in your views.

Sample Frame:

All firms established between 2001-2007

Matched Profile:

In terms of Status - limited (sourced from FAME) v unlimited (sourced fromExperian); Sector (to 1 level SIC); and Age

Sampling Approach:

Quotas set on sector and status (limited v unlimited) random selection withinquotas

Non-Users


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4.2 Sample Groups For Analysis

In this report, responses have been broken down into the following 3 key groups:

The report charts and tables show the responses for each of these groups where

appropriate.

SFLG Users:

SFLG Users who took part in the research

441 interviews in total

Non-Users Obtained Loan:

Sub-group of the total Non-Users firms who have successfully obtained abusiness bank loan since 2006

79 respondents in total

Non-Users Total:

All Non-Users who took part in the research (excluding booster interviews whohad not obtained a business bank loan)

1,026 interviews in total (1,049 non-users were interviewed but 23 were only askedthe booster questions and as such they are not included in most of theanalysis covered in this report)

Analysis Groups


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5. Profile

5.1 Age Of Business

A broad spread was achieved in terms of the age of the businesses interviewed, with

the chart below showing the age profile of the businesses interviewed by the keysub-groups of interest.

Chart 5.1 Age of Business

Base: All respondents (Base, Dont know/Refused)SFLG (441, 1%), Non-users obtaining loan (79, 0%), All Non-users (1049, 3%)

Whilst the non-user sample was designed to broadly match the SFLG users in termsof age, the SFLG user group did contain more very young firms i.e. those that wereestablished in the last 2 years, with two-fifths (40%) of SFLG users having beenestablished in the last 2 years compared to less than a quarter (23%) of non-users.In contrast, more than three-fifths (61%) of the non-user sample were establishedmore than 3 years ago, compared to less than two-fifths (37%) of SFLG user firms.

5


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5.2 Size Of Business

The chart below shows the business size profile of the businesses interviewed by keysub-groups of interest.

Chart 5.2 Size of Business

Base: All respondents (Base, Dont know/Refused)

SFLG (441, 0%), Non-users obtaining loan (79, 0%), All Non-users (1026, 1%)

The SFLG users tended to be slightly larger in size than non-user companies, withmore than two-fifths (45%) of SFLG users employing 10 or more people compared toa third (33%) of non-users.

1


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5.3 Legal Status Of Business

The table below compares business type and how businesses were establishedacross the main analysis sub-groups.

Table 5.3.1 Legal Status Of Business & How Established


Total Obtained Loan Total

Base: All respondents 441 79 1,026

Legal Status Of Business:

Private Limited Company (Ltd) 76% 71% 70%

Sole Trader 15% 6% 14%

Partnership 6% 13% 6%Public Limited Company (plc) 1% 6% 5%

Limited Liability Partnership 1% 1% 2%

Social Enterprise 0% 3% 2%

Limited by guarantee 0% 0% 1%

Other 0% 0% 0%

Dont know/Refused 0% 0% 0%

How Business Established:

Completely new independent start-up 80% 75% 71%

A purchase of an existing firm 16% 24% 24%

Spin-off from existing business 0% 0% 0%

Something else 3% 1% 4%

Dont know 0% 0% 1%

The pattern of company type was similar for both SFLG users and non-users,although there is some evidence of a slightly larger proportion of private limitedcompanies in the user sample (76%) compared with non-users (70%).

SFLG user firms were slightly more likely than non-user companies to be completelynew independent start-up firms (reflecting the slightly younger age profile), while non-

user firms were slightly more likely than user firms to have been established followinga purchase of an existing firm.


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5.4 Industry Sector

The industry sector profile of the businesses interviewed is shown in the chart below.

Chart 5.4 Industry Sector

Base: All respondents (Base)SFLG (441), Non-users obtaining loan (79), All Non-users (1049)

The industry sector profile was fairly similar for both the SFLG user and non-usergroups, with no significant differences evident. More than three-quarters of thebusinesses interviewed were engaged in the services sector, with the majority of theremainder involved in the production sector.


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5.5 Region

5.5.1 Business Region

A broad spread was achieved in terms of the regions in which the businesses

interviewed were based. The table below shows the regional profile of thebusinesses interviewed by the main analysis sub-groups of interest.

Table 5.5.1 Business Region



Base: All respondents 441 79 1,026

North East 7% 5% 5%North West 13% 16% 12%

Yorkshire & Humber 7% 6% 4%

West Midlands 10% 8% 9%

East Midlands 7% 3% 5%

East of England 5% 3% 5%

South West 11% 25% 14%

South East 16% 18% 19%

Greater London 8% 5% 14%

Wales 5% 6% 5%

Scotland 9% 4% 5%

Northern Ireland 1% 0% 2%

Other 0% 0% 0%

The regional profile of SFLG users and non-users is broadly similar, with nosignificant differences evident between the user and non-user groups.


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5.5.2 Deprived Areas

Additional post code analysis was undertaken to assess whether the business was ina deprived area the chart below summarises the responses.2

Chart 5.5.2 Whether Business Is In A Deprived Area

Base: All respondents (Base, Postcode not matched, Postcode not looked-up booster)SFLG (441, 20%, 0%), Non-users obtaining loan (79, 13%, 20%), All Non-users (1,026, 14%, 3%)

Overall, 14% of SFLG user businesses were located in deprived areas, with a similarproportion of non-users also located in such areas.

2 An area was considered to be deprived if its post code was in one of the 15% lowest Super OutputAreas on the multiple index of deprivation (for England only).


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5.6 Annual Turnover

Reflective of the general size of the businesses interviewed, firms generally hadannual turnovers of less than 2million at the time of being interviewed. The chartbelow summarises the annual turnover profile of the key analysis sub-groups.

Chart 5.6 Annual Turnover


There were some differences evident with respect to annual turnover levels betweenSFLG users and non-users. Non-user firms were slightly more likely than SFLG userbusinesses to have annual turnovers of less than 100,000, while SFLG users weremore likely than non-users to have annual turnovers of more than 500,000.However it should be noted that a higher proportion of non-users either did not knowtheir annual turnover or refused to give an answer for this question.


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5.7 Management Profile

5.7.1 Management Profile - Composition

Respondents were asked a number of questions about their management structure

and composition, and this section, and the table below, summarises the responsesgiven across the key sub-groups of interest.

Table 5.7.1 Management Profile Composition Summary



Base 441 79 1,026

Number of Directors in Day-to-Day Control of Business:

None 1% 0% 3%1-4 95% 96% 89%

5 or more 3% 4% 6%

Dont know/refused 1% 0% 2%

Proportion of Female Directors:

None 62% 46% 50%

Up to 10% 0% 0% 0%

11%-25% 2% 6% 3%

26%-50% 21% 37% 28%

Over 50% 13% 11% 14%

No owners in day-to-day control 1% 0% 3%


Whether Company Is Women-Led:

Yes 13% 11% 14%

No 85% 89% 84%


Proportion of Ethnic Minority Directors:

None 85% 90% 81%

Up to 10% 0% 0% 0%

11%-25% 0% 0% 1%

26%-50% 2% 3% 2%

Over 50% 10% 6% 10%No owners in day-to-day control 1% 0% 3%


Whether Company Is Ethnic Minority-Led:

Yes 10% 6% 10%

No 88% 92% 87%


Whether Company Has Any Non-Executive Directors:

Yes 15% 13% 16%

No 85% 87% 82%



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Non-user companies appear slightly more likely than SFLG users to have femaledirectors (45% of non-users, compared to 36% of SFLG users). However, therewere no differences evident between users and non-users in terms of being female-led, that is, where 50% or more of the total directorship was female.

There were no differences evident between SFLG users and non-users in terms ofthe ethnic directorship composition or being ethnic minority-led - more than a tenthhad at least one director from an ethnic minority group, with a similar proportion(10%) of both SFLG user and non-user firms being classified as ethnic minority-ledbusinesses, that is, where 50% or more of the total directorship was from an ethnicminority.

Only around a sixth of both SFLG user and non-user businesses interviewedemployed any non-executive directors.


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5.7.2 Management Profile - Skills

Respondents were asked a number of questions about their qualifications and skills this section, and the table below, summarises the responses given and compares thefindings between the user and non-user groups.

Table 5.7.2 Management Profile Skills Summary



Base 441 79 1,026

Highest Qualification Level Held:

Degree/HND/Masters/Other Higher 52% 42% 42%

A-Level/S-Level/OND 18% 27% 17%

GCSE/CSE/O-Level/NVQ1/NVQ2 16% 19% 18%

Other 2% 1% 1%

None 7% 5% 10%


Whether Have Specialist Management Qualifications:

Yes 25% 29% 21%

No 70% 66% 69%


Whether Have Specific Finance Qualifications:

Yes 17% 14% 16%

No 79% 81% 75%

Dont know/refused 4% 5% 9%Number Of Years Experience Managing/Owning A Business:

Less than 1 year 0% 3% 3%

1-3 years 21% 11% 10%

4-6 years 18% 22% 19%

7-9 years 9% 11% 11%

10-15 years 22% 22% 18%

More than 15 years 28% 32% 34%

Dont know 2% 0% 6%

Whether Been Involved In Starting Any Other Businesses Apart From This One:

Yes 43% 32% 35%

No 54% 67% 59%Dont know/refused 3% 1% 7%

Employment Status Of Main Partner/Managing Director Prior To Setting Up ThisBusiness:

Working as an employee 66% 71% 67%

Self-employed 25% 23% 21%

Unemployed 3% 1% 2%

Not working 3% 4% 3%


There are some differences evident between SFLG users and non-users in terms ofeducational qualifications, with more than half of SFLG users (52%) directors


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educated to degree-level or higher, compared to 42% of non-users. However, it isworth noting that a higher proportion of non-users felt unable or unwilling to answerthis question.

There were no significant differences between users and non-users when comparing

the proportions of directors with specialist management qualifications, and specificqualifications relating to finance. However, there is some evidence to suggest thatSFLG users are slightly less experienced in terms of hands on managementexperience with a higher proportion in the lower experience bands than non users.For instance, with 21% of SFLG user firms having managed or owned a business forless than 3 years, compared to 13% of non-users but non-users were slightly morelikely to have over 15 years management experience than SFLG users (34% of non-users compared to 28% of users).

There is however, an indication that SFLG users have displayed a moreentrepreneurial attitude in the past, with 43% of SFLG users claiming to have

previous business start-up experience, compared to 35% of non-users.


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5.8 Export Experience

The chart below shows the differences in exporting profile between the key sub-groups.

Chart 5.8 Whether Business Currently Exports Overseas


The majority of interviewed businesses do not currently export. SFLG users aremore likely than non-users to be current exporters, with just under a quarter (23%) ofSFLG users reporting they currently export overseas compared to around a sixth(16%) of non-users.

Only a very small proportion of both SFLG users and non-users can be classed ashigh volume exporters, with more than half of all their sales coming from overseascustomers.


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5.9 Strategic Direction Of The Business

Businesses were asked a number of questions to ascertain the strategic direction ofthe business and the extent of their business planning - these results are shown inthis section.

5.9.1 Current Growth Objectives

The chart below summarises the current growth objectives of the interviewedbusinesses by key respondent types.

Chart 5.9.1 Current Growth Objectives For The Business Over The Next 2-3 Years


Despite the prevailing economic conditions, the majority of businesses interviewedstated that they have set either moderate or substantial growth objectives for their

company over the next 2-3 years. There were some differences evident betweenSFLG users and non-users, with more than four-fifths (83%) of users stating that theyhad set either moderate or substantial growth objectives for their company over thenext 2-3 years, compared with 63% of non-users.

A larger proportion of non-users (29%) planned to consolidate over the next 2-3years and remain the same size, compared to only 13% of SFLG users, while therewere no differences evident between the proportions of users and non-usersexpecting their company to become smaller.


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5.9.2 Business Aspirations

The large majority of businesses were positive in terms of their current businessfocus as the chart below illustrates.

Chart 5.9.2 Key Focus For The Business At This Time


SFLG (441, 1%), Non-users obtaining loan (79, 1%), All Non-users (1026, 1%)

Again there were some differences evident between the SFLG user and non-usergroups. SFLG users appeared more likely to have a more positive current businessfocus in relation to sales, with two-thirds (67%) of users saying that their focus was toincrease their sales of current products or services, compared to just under half(48%) of non-users. There were, however, no differences evident between usersand non-users in terms of developing new products or services.

Non-users appeared more likely to be focusing on maintaining their sales of current

products or services, with three-tenths (30%) of non-user businesses focusing on thiscompared with 17% of SFLG users.

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5.9.3 Attitudes Towards The Business

Respondents were read three statements relating to their attitude towards theirbusiness and were asked to select which one most closely applied to their business.The table below highlights the differences in attitude between the sub-groups.

Table 5.9.3 Attitudes Towards The Business



Base 441 79 1,026

Our number one objective is togrow the size of the business

57% 46% 37%

As long as I earn a living I am quite

happy with the business8% 19% 22%

Our number one objective is tomaximise the income we earn fromthe business

33% 33% 36%

None of these 2% 3% 5%

In line with some of the other findings in this survey, businesses generally associatedwith the two most positive statements that they were offered.

Reflecting their most positive growth aspirations, a greater proportion of SFLG users

chose the statement our number one objective is to grow the size of the businessas the one that most closely applied to their firm (57%, compared to 37% of non-users). In contrast, non-users were more likely than users to feel that as long as Iearn a living I am quite happy with the business (22%, compared to only 8% ofSFLG users).


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5.9.4 Business Planning

Respondents were asked to indicate whether they had a current, written businessplan.

Chart 5.9.4 Whether Company Has A Current, Written Business Plan


As the chart above shows their are differences in business planning approach

between the key user and non-user groups, with SFLG user firms far more likely thannon-users to have a formal business plan (82% of users, compared with only 45% ofnon-users).

The table below shows the business planning breakdown amongst SFLG users bythe size of the SFLG guaranteed loan received.

Table 5.9.4.1 Whether Company Has A Current, Written Business PlanBy Loan Size SFLG Users Only

Loan Size For SFLG Users

Up to 50,000 50,001-100,000 100,000 ormore

Base: All SFLG users 173 149 119

Yes have a written business plan 78% 83% 85%

No do not have a written business plan 21% 17% 15%


It can be seen that SFLG user businesses with a larger loan size (of 100,000 ormore) were slightly more likely to have a written business plan than those firms who

received a smaller loan.


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When asked when this business plan was written or last revised, SFLG user firmsand non-users alike were most likely to have written or updated this plan in the last 2years, as detailed in the table below.

Table 5.9.4.2 Length Of Time Since Business Plan Was Written Or Last Revised



Base 441 79 1,026

Within the last 2 years 69% 52% 37%

2-5 years ago 11% 5% 6%

Over 5 years ago 0% 0% 1%

Dont know 1% 0% 1%

Do not have a business plan 18% 43% 52%

Dont know if have a business plan 0% 0% 2%


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5.10 Customers

Businesses were asked whether their customers are based in the UK, overseas orboth, and then to indicate where their main customers are based. The responses tothese questions are summarised in the following table.

Table 5.10 Location Of CustomersAll Customers And Main3 Customers



441 441 79 79 1,026 1,026

All Main All Main All Main

Locally (within 20 miles of your site) 80% 56% 78% 63% 80% 62%

Elsewhere in your region of the UK 50% 18% 56% 24% 50% 19%

In the UK but outside your region 49% 32% 46% 24% 43% 25%

Elsewhere in the EU 15% 3% 9% 0% 11% 3%

Other countries outside of the EU 12% 3% 8% 0% 9% 3%

Dont know/Refused 1% 2% 0% 1% 1% 2%

When focusing on all customers that businesses have, the large majority of firmshave UK based customers only. Whilst a proportion of both SFLG users and non-users do have overseas customers only a very small proportion of businesses had

their main customers overseas (around 6% of both users and non-users).

When focusing on the location of all of the customers of businesses, the patterns andconcentrations of customer locations were similar between SFLG users and non-users. However, when looking at main customers, there was some evidence of slightdifferences between users and non-users. Non-users were marginally more likely tohave their main customers located locally (62%, compared to 56% of SFLG users),while users are slightly more likely than non-users to have their main customerslocated outside of their region of the UK (32% and 25% respectively).

3 Although respondents were asked to select one option only for where their main customers werelocated, more than one answer was recorded if respondents were unable to choose just one.


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5.11 Competitors

5.11.1 Nature Of Competition In Main Markets

Businesses were asked to describe the nature of the competition in their main

markets and the findings are shown in the following chart.

Chart 5.11.1 Nature Of Competition In Main Markets


The patterns of competition experienced between SFLG users and non-users aresimilar, although more than three-fifths (61%) of SFLG users claimed theyexperienced either intense or very intense competition in their markets, compared toa slightly smaller proportion of non-users (55%). Generally those seeking loanfinance appeared to be more likely to be facing competition than those who were not.

2


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Respondents were asked whether the competition was mainly from small or largefirms and as the table below shows, the main competitors for these firms tendgenerally to be smaller firms, with no particular differences evident between SFLGusers and non-users.

Table 5.11.1 Size Of Competitor Firms



Base 441 79 1,026

Small firms (


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5.11.2 Potential For Competition To Take Up Current Sales

Businesses were asked whether, if they were to cease trading tomorrow, any of theircompetitors would take up their firms current sales over the next year. If they didthink their competitors would take up their sales they were also asked to indicate

where they thought such competitors would be based. A summary of the findings areshown in the table below.

Table 5.11.2 Competitor Profile



Base 441 79 1,026

Whether Any Competitors Would Take Up Firms Current Sales Over The Next Year IfYour Business Were To Cease Trading Tomorrow:

Yes, all of our sales 47% 56% 48%Yes, some of them 37% 33% 29%

No, no-one would take up our sales 10% 8% 12%


No competition at all 2% 1% 5%

Location Of Competitors That Would Take Up Firms Current Sales:

Locally (within 20 miles of your site) 49% 56% 50%

Elsewhere in your region of the UK 18% 25% 18%

In the UK but outside your region 27% 30% 23%

Elsewhere in the EU 5% 4% 6%

Other countries outside of the EU 5% 4% 4%


No competition at all 2% 1% 5%

No-one would take up our sales 10% 8% 12%

In line with the fact that businesses generally indicated high levels of competition intheir markets, just under half of both SFLG users (47%) and non-users (48%)believed that competitors would take up all of their sales within a year, if the companyceased trading tomorrow. Only around 1 in 10 firms felt that there would be nocompetitors to take up their current sales.

Both SFLG users and non-users felt that it would mainly be local or regional firmsthat would take up their sales, with only a small proportion of both users and non-users (around 10%) believing that their sales would be taken up by firms basedoverseas.


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5.11.3 Price Elasticity Of Demand

Businesses were asked, if they were forced by cost increases to raise their prices by10%, to what extent they thought this would impact on their sales. A summary of thefindings are shown in the chart below.

Chart 5.11.3 Price Elasticity Of Demand


In keeping with the previous views regarding the nature of competition in theirmarkets, around half of both SFLG users (47%) and non-users (50%) believed that ifthey were to introduce a 10% price increase on their products or services, they wouldbe likely to experience some level of reduction in their sales. There is someevidence to suggest that this feeling was slightly more prevalent amongst non-userfirms, with only a third (32%) of non-users believing a price increase would not affecttheir sales negatively, compared to nearly two-fifths (39%) of non-users.


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5.12 Innovation

5.12.1 Introduction Of New Products Or Services

Businesses were asked to indicate whether they had introduced any new products or

services in the last 2 years.

Chart 5.12.1 Whether Business Has Introduced New Products Or Services In TheLast 2 Years


The businesses interviewed displayed a high level of innovation, with the introductionof new or improved products or services in the last 2 years being notably higheramongst SFLG users (63%) than non-users (47%). Firms that had sought loanfinance were generally more likely to have introduced new products or services, be itthrough an SFLG loan or via a conventional bank loan.


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As the table below shows, the majority of those that have introduced new products orservices have introduced those that were just new to the business. However, SFLGusers appeared more likely than non-users to have introduced completely newproducts or services (20% of users, compared with 11% of non-users).

Table 5.12.1 Innovation - Whether New Products Or Services Are New To TheBusiness Or Completely New (i.e. Not Been Introduced By Anyone Else Before)



Base 441 79 1,026

Just new to the business 31% 44% 25%

Completely new 20% 6% 11%

Dont know 0% 0% 1%

No new products or services 48% 49% 62%

Dont know if anyone would take upsales

0% 0% 1%

5.12.2 Introduction Of New Processes

Businesses were also asked to indicate whether they had introduced any new orsignificantly new processes in the last 2 years the chart below summarises theresponses given.

Chart 5.12.2 Whether Business Has Introduced New Processes In The Last 2 Years


Compared to the high level of product and service innovation seen amongst thebusiness sample, smaller proportions had introduced new or improved processes to


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their business in the last 2 years. However, this form of innovation was again moreprevalent amongst SFLG users (44%) compared to non-users who had obtained aloan (37%) and non-users as a whole (32%).

5.12.3 Cutting Edge Technology

Businesses were asked whether any of the types of technology they use in theirbusiness could be considered to be cutting edge that is, technology which is novelor not widely used in their industry sector.

Chart 5.12.3 Whether Technology Used In Business Is Cutting Edge


Continuing the innovation profile findings already seen, SFLG users were more likelythan non-users to consider the technology used in their business as being cuttingedge, with two-fifths (41%) of users believing this to be the case compared with aquarter (26%) of non-users.


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The non-users were also asked which sources of finance they had applied for or triedto use previously and also whether they had actually obtained the finance they wereseeking- the table below shows a summary of the responses.

Table 6.1.1.2 Sources Of Finance Applied For Or Tried To Use In Last 2 Years

Summary Non-Users Only

Non-Users

Obtained Loan Total

Base: All Non-Users 79 1,049

Proportions Applied For/Tried To Use

Proportion who applied for/tried to use

Business bank loan secured 66% 6%

Business bank loan unsecured 37% 4%

Overdraft 10% 3%Loans or equity from directors or shareholders 5% 2%

Trade credit 3% 0%

Venture capital 1% 1%

Leasing 0% 1%

Family and friends 0% 0%

Business angel 0% 0%

Factoring 0% 0%

Other form of finance 0% 2%

The most common sources of finance applied for by the non-users as a whole were a

secured or unsecured business bank loan (6% and 4% respectively). Given that only18% of non-users had even attempted to source external finance the proportionapplying for each of the sources listed is low when you take the non-users as awhole.

The group of non-users who had obtained a loan contained around two-thirds (66%)who had obtained a secured bank loan and 37% who had obtained an unsecuredloan. For the small proportion who had obtained both a secured and unsecured loanwe asked them to focus in the interview on their experiences of the secured loan.

For the non-user group that had obtained a business bank loan a proportion had also

applied for a number of other finance sources. A tenth of non-users who hadobtained a loan (10%) had tried to access an overdraft facility, while small minoritieshad attempted to gain loans or equity from directors or shareholders, or financethrough trade credit or via venture capital.


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Focusing now on those who have sought finance only, the following tables show theproportions of non-users who have applied for various types of external finance sinceJanuary 2006, and also summarises the outcome of these applications.

Table 6.1.1.3 Sources Of Finance Applied For Or Tried To Use In Last 2 Years

Non-Users Who Have Sought External Finance Only

Non-Users

Obtained Loan Total

Base: All non-users who have sought external finance 79 184

Business Bank Loan Secured

Proportion who applied for/tried to use 66% 32%

- Obtained full amount applied for 59% 26%

- Obtained some of finance applied for 6% 3%

- Obtained none of finance applied for 0% 3%- Dont know/Refused 0% 1%

Did not apply for/try to use this form of finance 34% 68%

Business Bank Loan Unsecured




- Obtained none of finance applied for 0% 4%

- Dont know/Refused 0% 1%


Overdraft







Loans Or Equity From Directors Or Shareholders







Trade Credit

Proportion who applied for/tried to use 3% 2%- Obtained full amount applied for 0% 1%





Venture Capital








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Table 6.1.1.3 (Continued)Sources Of Finance Applied For Or Tried To Use In Last 2 Years

Non-Users Who Have Sought External Finance Only

Non-Users

Obtained Loan Total

Base: All non-users who have sought external finance 79 184

Leasing







Family And Friends

Proportion who applied for/tried to use 0% 3%- Obtained full amount applied for 0% 2%





Business Angel






Did not apply for/try to use this form of finance 100% 99%Factoring







Other Form Of Finance







Of the non-users who have sought external finance, business bank loans were by farthe most commonly-explored routes, with the large majority of those applying for abank loan actually obtaining the full amount that they applied for.


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6.1.2 Main Reasons For Seeking Finance

SFLG users and non-users who obtained a loan were asked to indicate all of thepurposes for which they were seeking finance and then to select the main reason fordoing so. The table below illustrates the responses.

Table 6.1.2 Main Reasons For Seeking FinanceAll Reasons And Main Reasons


Total Obtained Loan

441 441 79 79

All Main All Main

To start-up your business 57% 52% 11% 8%

To provide the company with working capital 29% 17% 37% 28%

To purchase an asset 18% 10% 46% 39%

To expand premises 10% 7% 15% 13%

To finance a new product or service 10% 4% 9% 3%

Relocation 3% 2% 3% 1%

To finance companys entry into a new market 5% 2% 4% 1%

To expand the business 2% 1% 1% 1%

Refurbishment 1% 1% 3% 3%

To purchase an existing business/franchise 1% 1% 1% 1%

Other 1% 1% 1% 1%Dont know/Refused 3% 4% 0% 1%

There were some marked differences evident in the reasons given by SFLG usersand non-users who obtained a loan for initially wanting to seek finance. The mostcommon reason for SFLG users was to provide funds to assist with business start-up(52% citing this as their main reason), with smaller proportions indicating their mainreason for seeking finance was to provide their company with working capital (17%)and to purchase an asset for the business (10%).

The pattern of response amongst non-users who had obtained a loan differed fromthe SFLG users in that the most common main reason why finance was sought wasto assist with the purchase of an asset (39%), followed by the need to provide thecompany with working capital (28%). The desire to expand business premises wasalso the most important reason for seeking finance for around an eighth (13%) ofnon-users who had obtained a loan. Unlike the SFLG users, very few (8%) of thenon-users who had obtained a loan had done so to start-up their business.


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6.1.3 Awareness Of SFLG Scheme

SFLG users and non-users who had obtained a loan were asked whether they wereaware of the SFLG scheme before approaching the bank for finance at this time.Non-users who had obtained a loan were read out the following description of the

SFLG scheme as part of this question:

The Small Firms Loan Guarantee Scheme is provided by the Government to helpeligible small firms obtain funding from banks in cases where they are unable to do

so through traditional routes.

Awareness of the SFLG scheme at this stage amongst SFLG users and non-userswho obtained a loan is summarised in the chart below.

Chart 6.1.3 Awareness Of SFLG Scheme Before Approaching Bank For Finance

Base: All respondents (Base, Dont know/Cant remember)SFLG (441, 6%), Non-users obtaining loan (79, 3%)

Unsurprisingly SFLG users were significantly more likely than those obtaining aconventional bank loan to be aware of the SFLG scheme. However, it was certainlynot the case that all SFLG users were aware of the scheme at the time of loanapplication. Approaching three-fifths (57%) of SFLG users were aware of the SFLGscheme before approaching the bank for finance on the occasion in question.

Just under a quarter (23%) of non-users who had obtained a loan were aware of theSFLG scheme.


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6.1.4 Alternative Sources Of Finance Available

Only around a sixth (15%) of SFLG users believed there were alternative sources offinance available to them when they first decided to apply for the loan guaranteed bySFLG, although the majority (76%) indicated that they felt there were none.

The table below summarises the types of alternative finance perceived as beingavailable to SFLG users when they first decided to apply for, or were offered, theloan guaranteed by the SFLG scheme, along with the proportion who actually appliedfor each one and the proportion who were successful in their application.

Table 6.1.4.1 Alternative Sources Of FinanceSFLG Users Only

SFLG Users

SourcesAvailable Sources AppliedFor

Proportion

WhoseApplication WasSuccessful

Base 441 441 441

Bank loan secured 5% 3% 1%

Loans or equity from directors orshareholders

3% 1% 1%

Overdraft 2% 0% 0%

Bank loan unsecured 1% 0% 0%

Business Angel 1% 0% 0%

Family and Friends 1% 0% 0%Factoring 1% 0% 0%

Use of own finance 1% 0% -

Venture capital 0% 0% 0%

Other 3% 2% 2%

None 1% 7% -

No alternative sources of financeavailable

76% 76% 76%

Dont know if alternative sourcesavailable

9% 9% 9%

Of the SFLG users who believed that there were alternative sources of financeavailable to them when they first decided to apply for the loan that was guaranteedby SFLG, they were most likely to see a secured bank loan and loans or equity fromdirectors or shareholders as the main alternative sources of finance available tothem.

Approximately half of these then went on to actually apply for finance through thesetwo channels, with only a third of those applying for a secured bank loan beingaccepted. However, these findings should be treated as indicative rather thanstatistically significant, bearing in mind the small base sizes involved in actuallyconsidering other finance sources. Very few SFLG users used the SFLG loan

alongside another source of finance. For example, only 6 out of 441 SFLG usersalso used a secured business bank loan alongside the SFLG loan.


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6.1.5 Whether Loan Only Offered On Proviso Would Be SFLG Backed

SFLG users were also asked whether they specifically applied for an SFLG loan orwhether it was the case that they were only offered a loan on the proviso that they

would take out an SFLG loan guarantee. Approaching two-thirds (63%) of SFLGusers specifically applied for a SFLG loan, while three-tenths (29%) were offered aloan on the proviso that they would take out an SFLG loan guarantee.

6.1.6 Alternative Project Funding

The chart below illustrates the number of separate occasions that SFLG userbusinesses applied for funding for their specific project, from any source, before theywere given a SFLG guaranteed loan.

Chart 6.1.6 Number Of Occasions Applied For Funding For This Project (From AnySource) Before Given A SFLG Guaranteed Loan

Base: All SFLG Users (Base, Dont know/Refused)SFLG (441, 6%)

For four-fifths (80%) of SFLG users, this represented their first loan application, whilea tenth (9%) had previously applied for finance from any source more than oncebefore.


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The table below shows the number of times that SFLG users had applied for fundingfor their specific project by the age of the business.

Table 6.1.4.2 Number Of Occasions Applied For Funding For This Project (From AnySource) Before Given A SFLG Guaranteed Loan

By Age SFLG Users Only

Age Of SFLG User Business

Less than 2years

2-3 years 3-5 years Over 5 years

Base: All SFLG users 177 100 98 63

First loan application 89% 80% 71% 71%

Applied once before 2% 3% 8% 11%

Applied twice before 5% 7% 4% 5%

Applied more than twice before 2% 4% 6% 6%

Dont know/cant remember 3% 6% 10% 6%

Irrespective of age the table illustrates that the vast majority of SFLG users had onlyapplied this once for funding i.e. they had been successful on their first attempt atseeking finance. However, the table does show that the slightly more establishedfirms are more likely to have needed to apply more than once for finance, with justover a fifth of those established over 5 years having applied once or more beforecompared with just a tenth of those established less than 2 years.


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6.2 The SFLG/Loan Application

6.2.1 The Specific SFLG Application

SFLG users were asked to indicate the point in their discussions with the bank thatthey talked about a SFLG guaranteed loan and also whether they felt the bank wouldhave given them a loan without the guarantee from the SFLG scheme.

Table 6.2.1.1 When First Talked With Bank About SFLG Guaranteed Loan

SFLG Users

Total

Base 441

Point In Discussions With Bank Talked About SFLG Guaranteed Loan:Right at the beginning (i.e. when first discussed theneed for a loan)

66%

During the loan application process 22%

At the end of the application process 4%

Dont know/Cant remember 8%

Whether Believe The Bank Would Have Given You A Loan Without TheGuarantee From The SFLG Scheme:

Yes, definitely 4%

Yes, probably 11%

Probably not 14%

Definitely not 22%No 1%

Dont know/cant remember 19%

Offered loan on proviso would take out SFLG loanguarantee

29%

In two-thirds of cases, the subject of the SFLG guaranteed loan was talked aboutright at the beginning of the discussions with the bank, with the majority of theremainder recalling that the subject was first discussed during the loan applicationprocess.

The guarantee from the SFLG scheme was viewed to have had an effect on thebanks decision to grant a loan to the business. More than a third (36%) of SFLGusers believed that the bank would either probably or definitely not given them a loanwithout the guarantee from the SFLG scheme.


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SFLG users were presented with a choice of three options and asked to indicatewhich of them were cited by the bank as reasons why they should take out a SFLGguaranteed loan. The responses are shown in the chart below.

Chart 6.2.1 Reasons Cited By Bank As Reasons For Taking Out A SFLG Loan

Base: All SFLG Users (Base, Other, Dont know)SFLG (441, 5%, 12%)

The majority of SFLG users were told by the bank that they should take out a SFLGloan because of reasons linked to lack of required security. In the main, this relatedto a lack of required security because the firm was starting out (63% of users weretold this) but around a sixth (17%) were told they should apply for a SFLG loan asthey had exhausted all of their collateral due to existing loans.

The table below shows the reasons cited by the bank as reasons why the businessshould take out a SFLG loan, broken down by age of business.

Table 6.2.1.2 Reasons Cited By Bank As Reasons For Taking Out A SFLG LoanBy Age SFLG Users Only

Age Of SFLG User Business

Less than 2years

2-3 years 3-5 years Over 5 years

Base: All SFLG users 177 100 98 63

Lack of required security becauseyou were starting out

80% 68% 53% 27%

Lack of required security becauseyou had exhausted all of yourcollateral due to existing loans

6% 18% 23% 33%

Insufficient track record 12% 19% 19% 19%

Dont know 8% 14% 12% 21%

Unsurprisingly, for SFLG user firms that had only been established in the last 2years, four-fifths (80%) were advised to take a SFLG guaranteed loan by the bank


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because of the lack of required security due to them only just starting out.Conversely, the fact that a business had exhausted all of their collateral due toexisting loans was more likely to be given as a reason to firms that had beenestablished for longer than 5 years.

The table below shows the reasons given by banks for taking out a SFLG loan by thesize of the SFLG guaranteed loan.

Table 6.2.1.3 Reasons Cited By Bank As Reasons For Taking Out A SFLG LoanBy Loan Size SFLG Users Only


Up to 50,00050,001-100,000

100,000 ormore


Lack of required security because youwere starting out

63% 69% 57%

Lack of required security because youhad exhausted all of your collateral due toexisting loans

15% 15% 21%

Insufficient track record 14% 15% 21%

Dont know 16% 9% 13%

Those SFLG user businesses with the largest loan sizes (of more than 100,000)were more likely than those being loaned smaller amounts to be advised by banks to

take out a loan guaranteed by the SFLG scheme because they had exhausted all oftheir collateral due to existing loans or due to their insufficient track record.


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6.2.2 Assistance From The Bank Loan Application

SFLG users and non-users who had obtained a loan were asked whether the bankprovided any help with the application for the loan or with their business plan whenthey first applied for the loan. The results are shown in the table below.

Table 6.2.1.4 Whether Bank Provided Help With Application For The Loan Or WithYour Business Plan


Total Obtained Loan

441 79

Yes help with application for loan 43% 15%

Yes help with business plan 3% 1%

Yes help with both application & business plan 21% 14%

No 26% 65%

Dont know/Cant remember 7% 5%

As the table above shows, SFLG users were far more likely to have received someform of help from the bank, mainly with their application, compared to non-users whohad obtained a conventional loan. Whilst only 26% of SFLG users stated that thebank had not helped with either the application or the loan, this was the case foralmost two thirds (65%) of non-users who had obtained a loan.


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6.3 Satisfaction With Bank Service Aspects

SFLG users and non-users who obtained a loan were asked to rate various aspectsof the bank loan application process that they had encountered this sectionsummarises the responses given.

6.3.1 Rating Of Help Provided By Bank With Business Plans

The chart below shows the ratings given for the help that the bank provided on firmsbusiness plans at the application stage.

Chart 6.3.1 Rating Of Help Provided By Bank On Business Plan

Base: All respondents (Base, Dont know)SFLG (441, 0%), Non-users obtaining loan (79, 0%)

In the majority of cases, both SFLG users and non-users claim that the bank did notprovide help with their business plans. However, of those that did receive business

plan help from the bank, the large majority rated this help as either very good orgood.


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6.3.2 Rating Of Application Preparation Information Help Provided By Bank

The chart below shows the ratings given for the help that the bank provided to assistfirms in preparing their loan application, including the guidance notes and otherprinted or online materials.

Chart 6.3.2 Rating Of Help Provided By Bank On Application Preparation

Base: All respondents (Base, Dont know)

SFLG (441, 8%), Non-users obtaining loan (79, 8%)

Banks appeared to give more help to firms in terms of preparing business loanapplications compared to the help they were seen to give with business plans. Thereis evidence to suggest that SFLG users may be slightly more likely to rate the helpgiven by the bank on the application process as either very good or good, with nearlytwo-thirds (65%) of SFLG users giving a rating of 4 or 5 out of 5 compared to 53%of non-users who obtained a loan.


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6.3.3 Speed Of Bank Reaching Loan Decision

The chart below shows the responses given in terms of how quickly the bankreached a decision on the firms loan. This measure is subjective as respondentsmay have different perceptions on when the application process started.

Chart 6.3.3 Speed Of Bank Reaching Loan Decision

Base: All respondents (Base, Dont know/Cant remember)SFLG (441, 12%), Non-users obtaining loan (79, 5%)

There were some differences between SFLG users and non-users in terms of thespeed with which the bank reached a decision on the firms loan. In general, SFLGusers had to wait longer than non-users who obtained a loan for a decision on theirloan two-fifths (41%) of non-users who obtained a loan stated that their bankreached a decision within 3 days compared to only a sixth (15%) of SFLG users.Two-fifths (41%) of SFLG users had to wait longer than a week to receive theirdecision, compared to just a quarter of non-users.


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The table below shows the speed of the banks loan decision for SFLG users by thesize of the SFLG guaranteed loan.

Table 6.3.3 Speed Of Bank Reaching Loan DecisionBy Loan Size SFLG Users Only


Up to 50,00050,001-100,000

100,000 ormore


The same day 5% 1% 2%

Within 2-3 days 18% 9% 7%

Within a week 28% 30% 37%

Within a month 25% 37% 32%

Over a month 12% 11% 8%

Dont know/Cant remember 11% 12% 15%

It can be seen that SFLG user businesses with a smaller loan size (of up to 50,000)were more likely to receive a quicker decision from the bank about their loancompared to those applying for larger loans. Just under a quarter (23%) of SFLGusers applying for loans under 50,000 received a decision within 3 days, comparedto less than a tenth (9%) of businesses applying for larger loans of more than100,000.


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6.3.4 Rating Of Overall Satisfaction Of Receiving SFLG Loan

The chart below shows the overall satisfaction recorded by SFLG users whenconsidering their total experience of receiving a loan guaranteed by the SFLGscheme.

Chart 6.3.4 Overall Satisfaction With Receiving SFLG Loan

Base: All SFLG Users (Base, Dont know/Cant remember)

SFLG (441, 3%)

In general, SFLG users were satisfied with their total experience of receiving a loanguaranteed by the SFLG scheme, with four-fifths (80%) giving either a very satisfiedor fairly satisfied rating. Only a small proportion (4%) expressed any form ofdissatisfaction with their overall experience of receiving this loan.


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6.3.5 Rating Of Clarity Of Nature Of Guarantee Given By Bank

The chart below shows the extent to which the nature of the guarantee was madeclear to the respondent by the bank.

Chart 6.3.5 Rating Of Clarity Of Nature Of Guarantee Given By Bank

Base: All SFLG Users (Base, Dont know/Cant remember)SFLG (441, 6%)

In general, SFLG users believed that the information given by the bank about thenature of the guarantee was made clear to them. Half (50%) stated that the nature ofthe guarantee was made very clear to them, with a further fifth (22%) giving a ratingof 4 out of 5. However, a small minority (7%) gave a low rating of either 1 or 2 outof 5 for this aspect.


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6.4 Sources Of External Advice Used

All businesses were asked whether they had used any external sources ofinformation, advice or support to help them develop their business over the last 2years, other than the SFLG support (for SFLG users) or external sources of finance

(for non-users) that they had already mentioned. The chart below summarises theresponses given.

Chart 6.4.1 Whether Used External Sources Of Information, Advice Or Support ToHelp Develop The Business Over The Last 2 Years


SFLG users appear to be more likely than non-users to have used other sources ofinformation, advice or support to help them develop their business over the last 2years, with two-fifths (40%) of users claiming to have done so, compared to a fifth(19%) of non-users.

However, a third (33%) of non-users who had obtained a loan had used othersources, providing more evidence that firms who actively seek finance are more likelyto explore a number of sources to aid them in their general business development.


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The table below summarises the nature of the external sources of information, adviceand support businesses have sought.

Table 6.4.1.1 Assistance That External Sources Of Information, Advice Or SupportProvided The Business With



Base 441 79 1,026

General business advice 32% 25% 16%

Financial advice 20% 13% 8%

Marketing 1% 0% 0%

Something else 3% 3% 1%


Not used any external sources ofadvice

59% 66% 79%

Dont know if used any externalsources of advice

1% 1% 1%

Both SFLG users and non-users were most likely to have received general businessadvice from other sources (a third of SFLG users received general business help, aquarter of non-users who had obtained a loan and a sixth of non-users as a whole).A fifth (20%) of SFLG users had also received financial advice from another source.


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The table below shows the specific sources of external information, advice andsupport used by businesses over the last 2 years (top mentions only). The pattern ofusage is similar between users and non-users, with most commonly-used sourcesamongst SFLG user firms being Business Links, followed by accountants and banks.

Table 6.4.1.2 Sources Of External Information, Advice Or Support Used TopMentions Only



Base 441 79 1,026

Business Link 10% 10% 5%

An accountant 9% 4% 3%

A bank 6% 1% 1%

Another consultant 4% 3% 2%

An Enterprise Agency 3% 5% 1%

A Trade Association 2% 0% 0%

A Chamber of Commerce 2% 1% 1%

Federation of Small Businesses 1% 3% 1%

Dont know/Cant remember 1% 1% 1%

Not used any external sources ofadvice

59% 66% 79%

Dont know if used any externalsources of advice

1% 1% 1%

There were no significant differences in the use of external sources of financebetween SFLG users who were already aware of the SFLG scheme before theyapproached the bank for finance and those firms that were not aware of the scheme.


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6.5 Further Finance Applications Since Obtaining SFLG Loan

SFLG users were asked whether they had applied for any further significant levels offunding or financial backing for their business since obtaining the SFLG guaranteedloan, and also to indicate the outcome of this. The table below summarises the

responses given.

Table 6.5.1.1 Further Finance Applications Made Since Obtaining SFLG LoanSFLG Users Only

SFLG Users

Total

Base 441

Whether Applied For Any Further Significant Levels Of Funding OrFinancial Backing For Business Since Obtaining SFLG Guaranteed Loan:

Yes 21%No 77%

Dont know 2%

Rating Of Success Of Any Applications (1-5 Scale):

1 No finance obtained 3%

2 Only a small amount of finance obtained 1%

3 Some of the finance obtained 2%

4 Nearly all of the finance obtained 2%

5 100% of finance applied for obtained 12%

(Applications still pending) 1%

Dont know 0%

Have not applied for any further funding 79%

Where Additional Finance Was Obtained From:

Business bank loan secured 6%

Business bank loan unsecured 3%

Overdraft 2%

Loans or equity from directors or shareholders 2%

Business angel 1%

Venture capital 1%

Family and friends 1%

Leasing 1%

Trade Credit 1%Other 3%

Dont know/cant remember 0%


No finance obtained 3%

(Application still pending) 1%

Dont know success of application 0%

A fifth (21%) of SFLG users had applied for further significant levels of funding orfinancial backing since obtaining their SFLG guaranteed loan. Of these, the majoritywere successful in their applications, either receiving all of the finance they applied

for or nearly all of it. The main source they approached was banks, either through


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secured loans, unsecured loans or overdrafts, with only a small minority using othersources.

The table below summarises the perceived effects that receiving a SFLG loan havehad on recipients.

Table 6.5.1.2 Effects Of Receiving SFLG Loan SummarySFLG Users Only

SFLG Users

Total

Base 441

Whether Feel Success In Obtaining Further Finance Was Influenced ByFact That Previously Received A SFLG Guaranteed Loan:

Yes 9%

No 6%

Dont know 2%


No finance obtained 3%

Application still pending 1%

Dont know success of application 0%

Whether Would Be More Confident In Ability To Secure External FinanceAs A Direct Result Of Receiving SFLG Guaranteed Loan:

Yes 76%

No 20%

Dont know 4%

Those that were successful in obtaining any finance since obtaining the SFLGguaranteed loan (76 respondents) were asked if they felt their success in obtainingfurther finance was in any way influenced by the fact that they had previouslyreceived an SFLG guaranteed loan. Just over half of these (equating to 9% of thetotal SFLG user sample) believed that this did have an influence on them receivingfurther funding, with two-fifths (equating to 6%) feeling that it had no influence.

All SFLG users were asked whether they were now more confident in their ability tosecure external finance as a direct result of receiving the SFLG loan. The majority ofSFLG users reported this had been an effect, with three-quarters (76%) of SFLGusers saying their confidence has increased.


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7. Impacts & Outcomes

This section summarises the various impacts and outcomes experienced by SFLGusers and non-users who have obtained a loan.

7.1 Specific Impacts

7.1.1 Overview

SFLG users and non-users who have obtained a loan were read out a list of possibleways in which their business may have benefited from receiving either a loanguaranteed by the SFLG scheme (in the case of SFLG users) or a bank loan (in thecase of non-users who have obtained a loan).

Respondents were asked firstly to indicate whether each was a benefit that their

business has experienced, or expects to experience in the future, as a direct result ofreceiving either the SFLG loan or the bank loan. For each one that has been, or willbe, a benefit, they were then asked to rate the extent to which this has been or will bea benefit, on a scale of 1 to 5 where 5 was to a critical extent and 1 meant to noextent.

An overall summary of the proportions giving a 4 or 5 out of 5 rating for theseaspects is shown in the chart below, presented in the key groupings of innovations,provision of capital and financial business performance measures.

Chart 7.1.1 Benefits Of SFLG Loan/Bank Loan Summary Of AspectsProportion Giving A Score Of 4 Or 5 Out Of 5 For Each Aspect


SFLG (441, 1%-5%), Non-users obtaining loan (79, 1%-4%)


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As the chart illustrates, the most commonly reported benefit of the SFLG loanamongst users was the fact that the loan had provided capital for equipment (41%giving a score of either 4 or 5 out of 5 for this aspect). The other three key benefitsexperienced by between a third and two-fifths of SFLG users were increased sales(38%), provided capital to get started (36%) and that it had meant that the firm could

introduce new products or services (35%).

The least commonly-experienced benefit for SFLG users was reduced costs, withonly 10% giving this a 4 or 5 out of 5 rating.

Although the pattern of benefits amongst non-users who had obtained a loan wasgenerally similar to that seen for SFLG users, the main difference is that non-userswho had obtained a loan were far less likely to have experienced a significant benefitin relation to the fact that the loan provided capital to get started (only 4% of non-users obtaining a loan selected this as a benefit, compared to 36% of SFLG users).This can largely be explained by the differences between the reasons for initially

seeking finance with non-users much less likely to be seeking start-up capital and assuch the rating of provided capital to get started was not asked to the majority ofnon-user firms.

The remainder of this section provides a breakdown of the individual ratings given foreach potential benefit and presents these in the three key themed groupings ofinnovations, provision of capital and financial business performance measures.Each of the following charts shows the proportion giving a score of between 1 and 5to each element, with those stating that the element had not been a benefit beingautomatically coded as 1 to no extent. Results are shown net of non-additionality,with those saying that they would have achieved similar business outcomes anywayat the main generic ad

sme loan guarantee scheme recipient and comparison group survey results-uk-2010

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