Publication - Research and analysis

SME Access To Finance Survey: 2019

This report sets out the findings of the SME Access to Finance Survey 2019.

71 page PDF

2.3 MB

71 page PDF

2.3 MB

SME Access To Finance Survey: 2019

71 page PDF

2.3 MB



  • Small and medium-sized enterprises (SMEs) play an important role in the Scottish economy and the use of external finance can support them to invest, innovate and grow. It is therefore important to understand whether the SME finance market in Scotland is working correctly, providing finance to viable firms.
  • The Scottish Government commissioned its first survey of SME finances in 2007, and followed this up with further surveys in 2009, 2010 and 2012 to monitor the impacts of the financial crisis on SMEs' ability to access finance. The survey was reinstated in 2019 to assess the extent to which SMEs' financing patterns had changed at a time when the economy and financial landscape was significantly different to when the first surveys were undertaken.
  • This report sets out the findings of the 2019 survey, undertaken over November 2019 - January 2020, prior to the onset of the Covid-19 Coronavirus pandemic in Scotland. It provides evidence on the experiences of SMEs in accessing finance at the time the survey was undertaken and provides a baseline for monitoring the impacts of the UK's exit from the EU and the Coronavirus pandemic.


  • 1,003 SMEs in Scotland took part in the survey via telephone from 4th November 2019 to 10th January 2020. The survey asked firms about their experiences in seeking finance both over the past three years and over the past 12 months, to provide a more recent snapshot of firms' experiences.
  • As in previous years, the survey included a quota for the number of firms who had sought finance over the last 12 months to enable a robust analysis of the experiences of those firms. As a result of this oversampling, the survey results do not reflect the SME population's demand and use of finance. This report therefore draws on external sources to estimate current use and demand for finance.

Key Findings

Use of finance

  • The proportion of SMEs using finance had declined from 2012, indicating an increasing preference to rely on internally generated resources - perhaps, in part, a legacy of the 2007-08 financial crisis.
  • Credit cards and overdrafts continued to be the most common forms of external finance used by SMEs.
  • RBS and Bank of Scotland continued to dominate the SME banking market in Scotland and rates of switching between banks remained low.
  • Most SMEs used their main bank as a provider for most forms of finance, indicating a reluctance among SMEs to consider different providers.

Demand for finance

  • SME demand for finance (which is, of course, closely linked to but not the same as use of finance) had also declined over time, again indicating SMEs had increasingly been relying on their own reserves.
  • Different sources place different estimates on SMEs' demand for external finance; however, they show that only a minority of SMEs seek finance in a given year and that demand increases with business size.
  • SMEs in the agriculture/primary industries were more likely than average to seek finance.
  • Overdrafts, lease/hire purchase and credit cards continued to be the most sought after forms of finance. The amounts of finance most sought were less than £5,000 and £10,000-£49,999.
  • The most common reason SMEs sought new finance was for cash flow purposes, indicating finance tended to be used more for day-to-day needs than for growth.
  • Most SMEs who sought finance only considered one provider and most chose their provider because they had used them before, again indicating a reluctance amongst SMEs to consider new sources or types of providers.

Attitudes to using external finance and reasons SMEs do not seek finance

  • The majority of SMEs who did not seek finance said they did not need it. Only a minority did not apply because they thought they would be turned down and this proportion had fallen over time.
  • Two thirds of SMEs that did not seek finance were completely self-funded and the majority said they were unlikely to use finance in the following year.
  • Three quarters said they would accept a slower growth rate that they could fund themselves rather than borrowing to grow faster, indicating a reluctance amongst SMEs to use external finance. This is, perhaps, a legacy of the financial crisis.

Supply of finance

  • All supply measures showed a significant improvement in the success of SMEs in obtaining finance compared with prior years, indicating credit conditions for SMEs had vastly improved at the time of the survey. Indeed, success rates were higher than in 2007, before the financial crisis, suggesting that businesses were more credit-worthy or that lenders' balance sheets had improved.
  • The majority of SMEs (87 per cent) who applied for finance were successful in obtaining all the finance they needed. The proportion of SMEs turned down in at least one of their applications, at six per cent, was a quarter of what it was at its peak in 2010. Just two per cent were turned down in each and every application.
  • The majority of applications (89 per cent) made by SMEs were successful. The proportion of applications for finance that were rejected, at four per cent, was less than a fifth of what it was in 2010.
  • Eight in ten SMEs (79 per cent) received all the finance they sought over the three years prior to the survey and almost all (97 per cent) received all they sought over the 12 months prior to the survey, indicating that credit conditions improved further over the year prior to the survey. The proportion that received none of the finance they sought over the 12 months prior, at less than one per cent, had fallen from over half in 2010.
  • Somewhat surprisingly, medium-sized and lower-risk businesses were more likely to have experienced rejection. That said, lower-risk firms were more likely to receive the full amount of finance sought and medium-sized firms were more likely than average to receive at least some of the finance they sought.
  • Rural SMEs were more likely than average to receive the full amount of finance sought, likely driven by the prevalence of the agriculture sector in rural areas, which saw the highest success rates of all the sectors.
  • The proportion of SMEs reporting an increase in the cost of credit over the year prior to the survey had halved since 2012 and perceptions of ease of access to finance had improved across all finance types relative to 2012.

Abilities in applying for finance and use of external finance

  • Just over half of SMEs felt confident in their understanding of the different forms of external finance available. SMEs felt more confident in their ability to put together an application from their main bank than other providers. This echoes the findings that most SMEs rely on their main bank for most of their finance needs and indicates there may be a need to improve SMEs' understanding of the range and benefits of the various financial products and providers available.
  • Just over a third of SMEs sought external advice when considering or applying for finance and most relied on their accountant/financial adviser or main bank, suggesting there may be a need to encourage greater use of independent external advice.

Obstacles facing SMEs

  • When considered alongside other factors, access to finance does not appear to present a pressing problem to SMEs as a whole. However, when considering finance in isolation, a quarter of SMEs considered it to be a problem rated 5 or more on a 1-10 scale, where a higher score indicates increasing severity. More than one in ten medium-sized firms and manufacturing businesses rated finance as a critical problem, reflecting their higher rejection rates and indicating there were still groups of firms that faced issues in accessing the finance they needed.
  • Local bank branches were considered more important by rural and agriculture SMEs and a higher proportion of rural SMEs felt bank branch closures were affecting their ability to access finance.


The survey results indicate that credit conditions for SMEs had improved vastly over the past decade, with success rates higher in 2019 than pre-financial crisis levels. The majority of SMEs applying for finance were successful in obtaining all they needed. However, there were groups for which success rates were lower and who were more likely to consider access to finance a problem including, somewhat surprisingly, larger SMEs as well as manufacturing firms. In addition, rural firms had been more affected by recent bank branch closures.

Alongside this improvement on the supply side, the results also demonstrate that the use of and demand for external finance by SMEs in Scotland had fallen over time and that only a minority of SMEs sought finance. The results suggest there is a significant reluctance amongst SMEs to use external finance, with SMEs preferring to rely on their own internally generated reserves and willing to grow slower to do so. This could potentially be hindering growth at the business level and therefore in the wider Scottish economy.

The findings suggest that there may be a need to improve SMEs' understanding of the range and benefits of the various financial products and providers available and, indeed, of the significant improvements seen in application success rates over the last decade. In addition, there appears to be a need to encourage SMEs to make greater use of independent external financial advice.