More SMEs profitable in last three months

The number of SMEs making a profit continued to increase during the third quarter of the year.

Profitable

This is according to the BDRC SME Finance Monitor, in which 77 per cent of SMEs reported making a profit during the three months, up from 69 per cent during the same quarter last year.

Meanwhile the number of SMEs using personal funds to finance their business fell to 28 per cent, compared with 46 per cent during the third quarter of 2012.

A third of firms with no employees were using external finance during the quarter, lower than the SME average of 40 per cent. Of all SMEs, 31 per cent were using a loan, overdraft, or credit cards, down from 40 per cent at the start of 2012.

But the report also indicates that businesses are moving away from traditional forms of finance. Awareness of crowd funding reached its highest level since the survey began in 2011, while the gap between traditional and alternative finance narrowed during the three month period.

Phil Orford, chief executive of the Forum of Private Business, said: “Despite the banks’ continued efforts to win back SME confidence, a large number of small businesses remain unconvinced. Many are increasingly considering options such as crowdfunding, trade credit, and dipping into their own reserves to fund future plans, which is likely to stifle the pace of growth in 2015.

“There is an urgent need for banks to re-establish trust with small businesses, particularly as we enter a period of political and economic uncertainty in the run up to the general election in May.”