SME Loan Guarantee Scheme Recipient and Comparison Group Survey Results-UK-2010

Department for Business, Innovation & Skills (BIS)
Small Firms Loan Guarantee (SFLG) Scheme Recipient

and Comparison Group Survey Results
January 2010
URN 10/511
OMB Research Endeavour House 259 Forstal Road Aylesford Kent ME20 7AP
T. 01622 790900 E. info@ombresearch.co.uk W. www.ombresearch.co.uk
Contents
1. Introduction......................................................................................................1
2. Research Objectives.......................................................................................1
3. Summary Of Key Findings..............................................................................2
3.1 Usage & Awareness Of SFLG...................................................................2
3.2 Experiences Of SFLG................................................................................3
3.3 Benefits Of SFLG To Firms.......................................................................3
3.4 Benefits Of SFLG To Economy.................................................................4
4. Methodology....................................................................................................5
4.1 Sample Groups..........................................................................................7
4.2 Sample Groups For Analysis.....................................................................9
5. Profile............................................................................................................10
5.1 Age Of Business......................................................................................10
5.2 Size Of Business.....................................................................................11
5.3 Legal Status Of Business........................................................................12
5.4 Industry Sector.........................................................................................13
5.5 Region......................................................................................................14
5.6 Annual Turnover......................................................................................16
5.7 Management Profile.................................................................................17
5.8 Export Experience...................................................................................21
5.9 Strategic Direction Of The Business........................................................22
5.10 Customers..............................................................................................27
5.11 Competitors............................................................................................28
5.12 Innovation..............................................................................................32
6. Usage of Finance..........................................................................................35
6.1 The Finance-Seeking Process................................................................35
6.2 The SFLG/Loan Application....................................................................44
6.3 Satisfaction With Bank Service Aspects..................................................48
6.4 Sources Of External Advice Used...........................................................54
6.5 Further Finance Applications Since Obtaining SFLG Loan.....................57
7. Impacts & Outcomes.....................................................................................59
7.1 Specific Impacts.......................................................................................59
7.2 Additionality..............................................................................................70
7.3 Other Benefits Of SFLG To Firms...........................................................83
1
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 will
be 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 for
Employment Studies (IES)1. The specific objective of this wider study is to form an
overall assessment of the value for money provided by SFLG, drawing on the
outcomes of the early assessment and additional primary research and secondary
analysis of existing datasets on areas such as customer satisfaction and profiling as
well as the impact and effectiveness of the products.
It is important to note that the figures presented in this report show the observed
relationship between the different variables. Statistical analysis in the wider study will
help to control for any differences between the SFLG user group and comparison
samples to allow an assessment of the impact of the programme to be made.
The research was conducted by OMB Research and utilised a telephone

methodology, with all interviews conducted using CATI (Computer Assisted
Telephone Interviewing) and lasting an average of around 21 minutes for users and
15 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 the

general 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 the
economy.
1
Cowling “Economic Evaluation of the Small Firms Loan Guarantee (SFLG) Scheme” (2010) Institute
for Employment Studies.
2
3. Summary Of Key Findings
3.1 Usage & Awareness Of SFLG
The SFLG scheme appears to be an important first step in financing businesses, as

well as the only source of finance available. This is evidenced by the findings
that:
The SFLG loan application was the first application that four-fifths (80%) of SFLG
user businesses had made to any source for their project;
Three-quarters (76%) claimed there were no other sources of finance available to

them.
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 of
information, help or advice to assist with their business development in the last
2 years, compared to a third (33%) of non-users who had obtained a loan and
only 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 need
the loan to purchase an asset (39%).
The profile of SFLG user companies in terms of women-led and ethnic minority-led
firms is similar to the general SME population. However, there may be some
evidence to suggest that SFLG guaranteed loan take-up is perhaps slightly
higher in deprived areas compared to the take-up of normal loans (although
this is not statistically significant).
Awareness of the SFLG scheme before approaching the bank for finance was quite
high, with nearly three-fifths (57%) of SFLG users claiming to have been
aware of the scheme before this point. This compares to only 23% of non-
users who had obtained a loan.
3
3.2 Experiences Of SFLG
Overall satisfaction with the total experience of receiving a loan guaranteed by the
SFLG scheme was high, with 46% very satisfied and a further 34% fairly
satisfied. Furthermore:
Nearly two-thirds (65%) of SFLG users rated the bank’s help with their application as
good or very good, compared to just over half (52%) of non-users who had
obtained a normal loan;
The large majority (76%) of SFLG users did not receive help with their business plan
from 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% of
SFLG 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 of
positive benefits:
Firms receiving a loan through SFLG scheme appear to have experienced stronger
employment and turnover growth than non-users obtaining a normal loan and
non-users as a whole;
Three-quarters (76%) of SFLG users indicated that they would now be more
confident in their ability to source external finance as a direct result of their
experiences of receiving a SFLG loan;
SFLG users and non-users who obtained a normal loan generally experienced
similar benefits in terms of innovation and business performance measures.
However, SFLG users were more likely to have experienced benefits relating
to provision of capital, most notably being provided with the capital to get
started (36% compared to 4% of non-users) and being provided with capital
for premises (20% and 13% respectively). This is probably largely explained
by differences in the main reasons for seeking finance as SFLG users were
much more likely to have been looking for start-up finance whereas non-users
were more likely to be seeking finance for an asset.
More than two-fifths (43%) of SFLG users would either probably or definitely have not
achieved similar results without the SFLG guaranteed loan, compared to a
slightly smaller proportion of non-users who had obtained a loan (38%);
4
Around half (49%) of SFLG users would probably or definitely not have gone ahead
with the project or start-up that the SFLG loan funded in the absence of this
loan. However, non-users who had obtained a non-SFLG loan were more
likely to feel that they would definitely or probably not gone ahead without the
finance they received (65%);
More than four-fifths (81%) of SFLG users believed that the SFLG guaranteed loan
would have either a fairly or very positive influence on the growth prospects of
their 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 economy
as a whole:
Nearly two-thirds (63%).of SFLG users had introduced either new or significantly
improved products or services in the last 2 years, a similar proportion as for
non-users who had obtained a loan. However, SFLG users were slightly more
likely 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 their
businesses (41%) compared to non-users who obtained a loan (18%) and
non-users as a whole (26%).
5
4. Methodology
The research was conducted by OMB Research Ltd. via telephone interviews with
firms 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 was
matched in terms of business age, legal status of business i.e. whether limited or
unlimited and by broad business sector. The limited ‘non-user’ companies were
sourced from FAME whilst the unlimited companies were sourced from Experian.
Interviews were administered using CATI (Computer Assisted Telephone
Interviewing) and all telephone fieldwork was conducted at BMG Direct’s telephone
centre in Birmingham by a team of experienced business-to-business interviewers.
The main fieldwork was conducted during August and September 2008 and the
average interview duration during fieldwork was around 21 minutes for users and 15
minutes for non-users. The main fieldwork was supplemented by a further wave of
fieldwork which took place in December 2008. This additional fieldwork wave was
intended to boost the number of non-user businesses who had obtained a business
bank loan so as to allow more robust sub-analysis of this group. The sample for this
‘booster’ 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 business
bank loan in the last 12 months and were willing to participate in future BIS research
were included in the ‘booster’ sample group.
The questionnaire was fully piloted, both quantitatively and qualitatively, prior to the
start of the main fieldwork. The quantitative pilot was conducted prior to live
fieldwork 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 the
questionnaire as well as the content.
Whilst the questionnaire included a significant amount of text substitution and routing
to ensure that questions were relevant to both SFLG users and non-users, the core
of the questionnaire was kept consistent in order that comparable data could be
collected.
The survey was introduced to all respondents as being on behalf of BERR (formerly
the 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 finance
through the SFLG scheme, while for non-users the evaluation was positioned as a
study concerning how businesses raise finance, any problems they face and whether
the government can provide assistance with this.
All interviews were conducted with senior personnel within each business, most
commonly the owner or director. The person with whom the interview was conducted
varied from company to company. As the SFLG recipient database did not contain a
named contact (or telephone number) we had to establish at the start of the interview
the best person to speak to and initially asked for the person who would know most
about 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.
6
The table below shows the number of sample records available, the number of SFLG
businesses for whom we were able to source a telephone number for (using both
automated and manual telephone look-up approaches), the approximate number of
records lost due to unusable sample (unobtainable telephone number, duplicate
records etc.) and the number of interviews completed within each of the sample
groups along with the associated response and refusal rates. Response rates have
been calculated by dividing the number of completed interviews by the total number
of useable contacts loaded onto CATI.
Table 4.1 Survey Coverage

SFLG Users Non-Users
SAMPLE CLEANING
Total in-scope records provided
2,244 -
(guaranteed/repaid)
Telephone number found 1,228 -
CATI SCREENING
Selection for CATI 1,228 6,467
Unusable – ineligible for interview,
business contact details incorrect, number 341 1,167
unobtainable, etc.
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% 4% 3%
observed)
Statistical Significance
Throughout this report, any differences referred to across sub-analysis groups are
statistically 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 be
apparent discrepancies between the charts/tables and the commentary when several
figures are combined. For example, values of 8.4% and 15.3% would be shown as
8% and 15% respectively in a chart, but the combined value if referred to in the
commentary would be 23.7% and hence displayed as 24%.
7
‘Don’t know’ or ‘Not answered’ Responses
At the bottom of all charts and figures the proportion of respondents unable to
answer, 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 of
questions the proportion unable or unwilling to answer a particular question are very
low, but for some questions such as turnover and attributable turnover growth etc
these 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)
SFLG Users
Sample Frame:
All firms who received a SFLG loan in 2006 (taking into account the post Graham
Review changes to the scheme)
Exclusions:
Any firm where the status of the loan was anything other than ‘guaranteed’ or
‘repaid’
Sampling Approach:
Random sample amongst firms where telephone contact number could be sourced
(using automated and manual look-up process)
This respondent group were read these descriptions at the start of the interview:
“We have been commissioned by the Department for Business, Enterprise and
Regulatory Reform (BERR – formerly the DTI) to conduct an evaluation of firms that
have applied for finance and according to their records you received a loan that was
guaranteed by the Small Firms Loan Guarantee Scheme (SFLG).”
“The Small Firms Loan Guarantee is a joint venture between the Department for
Business, Enterprise and Regulatory Reform (formerly the DTI) and a number of
approved lenders. The scheme provides a guarantee to encourage banks and other
financial institutions to lend money when small firms are unable to raise conventional
finance for viable projects because of a lack of security or established track record.”
8
4.1.2 Non-Users (i.e. Non-Beneficiaries)
Non-Users
Sample Frame:
All firms established between 2001-2007
Matched Profile:
In terms of Status - limited (sourced from FAME) v unlimited (sourced from
Experian); Sector (to 1 level SIC); and Age
Sampling Approach:
Quotas set on sector and status (limited v unlimited) – random selection within
quotas
This group of respondents were read the following description at the start of the
interview:
“We have been commissioned by the Department for Business, Enterprise and
Regulatory Reform (BERR – formerly the DTI) to conduct an evaluation of how
businesses raise finance, any problems they face and whether the government can
provide assistance with this.”
To encourage participation, respondents were also read the following after this initial
introduction:
“It doesn’t matter if your business has not needed to raise finance recently, we are
still interested in your views.”
9
4.2 Sample Groups For Analysis
In this report, responses have been broken down into the following 3 key groups:
Analysis Groups
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 a
business bank loan since 2006
79 respondents in total
Non-Users Total:
All Non-Users who took part in the research (excluding ‘booster’ interviews who
had not obtained a business bank loan)
1,026 interviews in total (1,049 non-users were interviewed but 23 were only asked
the ‘booster’ questions and as such they are not included in most of the
analysis covered in this report)
The report charts and tables show the responses for each of these groups where
appropriate.
10
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 key
sub-groups of interest.
Chart 5.1 Age of Business
Base: All respondents (Base, Don’t 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 terms
of age, the SFLG user group did contain more very young firms i.e. those that were
established in the last 2 years, with two-fifths (40%) of SFLG users having been
established 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 established
more than 3 years ago, compared to less than two-fifths (37%) of SFLG user firms.
5%
11
5.2 Size Of Business
The chart below shows the business size profile of the businesses interviewed by key
sub-groups of interest.
Chart 5.2 Size of Business

The SFLG users tended to be slightly larger in size than non-user companies, with
more than two-fifths (45%) of SFLG users employing 10 or more people compared to
a third (33%) of non-users.
1
3
12
5.3 Legal Status Of Business
The table below compares business type and how businesses were established
across 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%
Don’t 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%
Don’t 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 limited
companies in the user sample (76%) compared with non-users (70%).
SFLG user firms were slightly more likely than non-user companies to be completely
new 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 following
a purchase of an existing firm.
13
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-user
groups, with no significant differences evident. More than three-quarters of the
businesses interviewed were engaged in the services sector, with the majority of the
remainder involved in the production sector.
14
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 the
businesses 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 no
significant differences evident between the user and non-user groups.
15
5.5.2 Deprived Areas
Additional post code analysis was undertaken to assess whether the business was in
a 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 similar
proportion 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 Output
Areas on the multiple index of deprivation (for England only).
16
5.6 Annual Turnover
Reflective of the general size of the businesses interviewed, firms generally had
annual turnovers of less than £2million at the time of being interviewed. The chart
below 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 between
SFLG users and non-users. Non-user firms were slightly more likely than SFLG user
businesses to have annual turnovers of less than £100,000, while SFLG users were
more 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 know
their annual turnover or refused to give an answer for this question.
17
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 responses
given 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%
Don’t 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%
18
Non-user companies appear slightly more likely than SFLG users to have female
directors (45% of non-users, compared to 36% of SFLG users). However, there
were 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 of
the ethnic directorship composition or being ‘ethnic minority-led’ - more than a tenth
had 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-led’
businesses, that is, where 50% or more of the total directorship was from an ethnic
minority.
Only around a sixth of both SFLG user and non-user businesses interviewed
employed any non-executive directors.
19
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 the
findings 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%
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%
Whether Been Involved In Starting Any Other Businesses Apart From This One:
Yes 43% 32% 35%
No 54% 67% 59%
Employment Status Of Main Partner/Managing Director Prior To Setting Up This
Business:
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 of
educational qualifications, with more than half of SFLG users (52%) directors
20
educated to degree-level or higher, compared to 42% of non-users. However, it is

worth noting that a higher proportion of non-users felt unable or unwilling to answer
this question.
There were no significant differences between users and non-users when comparing
the proportions of directors with specialist management qualifications, and specific
qualifications relating to finance. However, there is some evidence to suggest that
SFLG users are slightly less experienced in terms of hands on management
experience 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 for
less than 3 years, compared to 13% of non-users but non-users were slightly more
likely 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 more

‘entrepreneurial’ attitude in the past, with 43% of SFLG users claiming to have
previous business start-up experience, compared to 35% of non-users.
21
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 are
more likely than non-users to be current exporters, with just under a quarter (23%) of
SFLG 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 as
‘high volume’ exporters, with more than half of all their sales coming from overseas
customers.
22
5.9 Strategic Direction Of The Business
Businesses were asked a number of questions to ascertain the strategic direction of

the business and the extent of their business planning - these results are shown in
this section.
5.9.1 Current Growth Objectives
The chart below summarises the current growth objectives of the interviewed
businesses 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 interviewed

stated that they have set either moderate or substantial growth objectives for their
company over the next 2-3 years. There were some differences evident between
SFLG users and non-users, with more than four-fifths (83%) of users stating that they
had set either moderate or substantial growth objectives for their company over the
next 2-3 years, compared with 63% of non-users.
A larger proportion of non-users (29%) planned to consolidate over the next 2-3
years and remain the same size, compared to only 13% of SFLG users, while there
were no differences evident between the proportions of users and non-users
expecting their company to become smaller.
23
5.9.2 Business Aspirations
The large majority of businesses were positive in terms of their current business
focus as the chart below illustrates.
Chart 5.9.2 Key Focus For The Business At This Time

Again there were some differences evident between the SFLG user and non-user
groups. SFLG users appeared more likely to have a more positive current business
focus in relation to sales, with two-thirds (67%) of users saying that their focus was to
increase their sales of current products or services, compared to just under half
(48%) of non-users. There were, however, no differences evident between users
and 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 this
compared with 17% of SFLG users.
1%
24
5.9.3 Attitudes Towards The Business
Respondents were read three statements relating to their attitude towards their
business 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 to

57% 46% 37%
grow the size of the business”
“As long as I earn a living I am quite
8% 19% 22%
happy with the business”
“Our number one objective is to
maximise the income we earn from 33% 33% 36%
the business”
None of these 2% 3% 5%
In line with some of the other findings in this survey, businesses generally associated
with 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 business”
as 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 I
earn a living I am quite happy with the business” (22%, compared to only 8% of
SFLG users).
25
5.9.4 Business Planning
Respondents were asked to indicate whether they had a current, written business
plan.
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 than
non-users to have a formal business plan (82% of users, compared with only 45% of
non-users).
The table below shows the business planning breakdown amongst SFLG users by
the size of the SFLG guaranteed loan received.
Table 5.9.4.1 Whether Company Has A Current, Written Business Plan

By Loan Size – SFLG Users Only
Loan Size For SFLG Users

£50,001- £100,000 or
Up to £50,000
£100,000 more
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 or
more) were slightly more likely to have a written business plan than those firms who
received a smaller loan.
26
When asked when this business plan was written or last revised, SFLG user firms
and non-users alike were most likely to have written or updated this plan in the last 2
years, 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%
Do not have a business plan 18% 43% 52%
Don’t know if have a business plan 0% 0% 2%
27
5.10 Customers
Businesses were asked whether their customers are based in the UK, overseas or
both, and then to indicate where their main customers are based. The responses to
these questions are summarised in the following table.
Table 5.10 Location Of Customers

All 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%
Don’t know/Refused 1% 2% 0% 1% 1% 2%
When focusing on all customers that businesses have, the large majority of firms
have 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 and
concentrations of customer locations were similar between SFLG users and non-
users. However, when looking at main customers, there was some evidence of slight
differences between users and non-users. Non-users were marginally more likely to
have 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 customers
located 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 were
located, more than one answer was recorded if respondents were unable to choose just one.
28
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 are
similar, although more than three-fifths (61%) of SFLG users claimed they
experienced either intense or very intense competition in their markets, compared to
a slightly smaller proportion of non-users (55%). Generally those seeking loan
finance appeared to be more likely to be facing competition than those who were not.
2%
29
Respondents were asked whether the competition was mainly from small or large
firms and as the table below shows, the main competitors for these firms tend
generally to be smaller firms, with no particular differences evident between SFLG
users and non-users.
Table 5.11.1 Size Of Competitor Firms

Base 441 79 1,026

Small firms (<250 employees) 58% 53% 61%
Large firms (250+ employees) 19% 18% 12%
Both small and large firms 18% 25% 19%
No competition at all 5% 1% 5%
30
5.11.2 Potential For Competition To Take Up Current Sales
Businesses were asked whether, if they were to cease trading tomorrow, any of their
competitors would take up their firm’s current sales over the next year. If they did
think 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 are
shown in the table below.
Table 5.11.2 Competitor Profile

Base 441 79 1,026

Whether Any Competitors Would Take Up Firm’s Current Sales Over The Next Year If
Your 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%
Location Of Competitors That Would Take Up Firm’s 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-one would take up our sales 10% 8% 12%
In line with the fact that businesses generally indicated high levels of competition in
their 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 company
ceased trading tomorrow. Only around 1 in 10 firms felt that there would be no
competitors to take up their current sales.
Both SFLG users and non-users felt that it would mainly be local or regional firms
that 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 based
overseas.
31
5.11.3 Price Elasticity Of Demand
Businesses were asked, if they were forced by cost increases to raise their prices by
10%, to what extent they thought this would impact on their sales. A summary of the
findings 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 their
markets, around half of both SFLG users (47%) and non-users (50%) believed that if
they were to introduce a 10% price increase on their products or services, they would
be likely to experience some level of reduction in their sales. There is some
evidence to suggest that this feeling was slightly more prevalent amongst non-user
firms, with only a third (32%) of non-users believing a price increase would not affect
their sales negatively, compared to nearly two-fifths (39%) of non-users.
32
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 The
Last 2 Years

The businesses interviewed displayed a high level of innovation, with the introduction
of new or improved products or services in the last 2 years being notably higher
amongst SFLG users (63%) than non-users (47%). Firms that had sought loan
finance were generally more likely to have introduced new products or services, be it
through an SFLG loan or via a conventional bank loan.
33
As the table below shows, the majority of those that have introduced new products or
services have introduced those that were just new to the business. However, SFLG
users appeared more likely than non-users to have introduced completely new
products or services (20% of users, compared with 11% of non-users).
Table 5.12.1 Innovation - Whether New Products Or Services Are New To The
Business 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%
No new products or services 48% 49% 62%
Don’t know if anyone would take up
0% 0% 1%
sales
5.12.2 Introduction Of New Processes
Businesses were also asked to indicate whether they had introduced any new or
significantly new processes in the last 2 years – the chart below summarises the
responses 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 the
business sample, smaller proportions had introduced new or improved processes to
34
their business in the last 2 years. However, this form of innovation was again more
prevalent amongst SFLG users (44%) compared to non-users who had obtained a
loan (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 their
business could be considered to be ‘cutting edge’ – that is, technology which is novel
or 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 likely
than non-users to consider the technology used in their business as being ‘cutting
edge’, with two-fifths (41%) of users believing this to be the case compared with a
quarter (26%) of non-users.
35
6. Usage of Finance
Respondents were asked a number of questions relating to aspects of their initial

finance-seeking process. This section outlines the findings.
6.1 The Finance-Seeking Process
6.1.1 Finance Seeking History
SFLG non-users were asked a number of questions relating to their previous

experiences of seeking or obtaining any external finance for investment. The table
below shows a summary of the responses.
Table 6.1.1.1 Finance Seeking History – Summary

Non-Users Only
SFLG Non-Users
Obtained Loan Total
79 1,049
Whether Business Has Sought Or Obtained Any External Finance For Investment
Since The Start Of 2006:
Yes 100% 18%
No 0% 81%
Don’t know 0% 1%
On How Many Separate Occasions Has Your Business Applied For External
Finance Since The Start Of 2006:
Just once 63% 9%
Twice 24% 5%
More than twice 11% 4%
Don’t know/Can’t remember 1% 0%
Have not sought/obtained external finance 0% 82%
When Made Application(s) For External Finance:
2006 39% 7%
2007 54% 10%
2008 29% 7%
Have not sought/obtained external finance 0% 82%
Less than a fifth (18%) of the total non-user sample had sought or obtained any
external finance for investment since the start of 2006 (i.e. to match the same time
frame as the SFLG users). Of those that had sought finance half had applied for
finance only once although a proportion had applied more than twice.
Amongst the non-user group of respondents that had actually obtained a loan, for
around two-fifths (39%) the loan dated back to 2006, whilst for the remainder the loan
application was more recent than this.
36
The non-users were also asked which sources of finance they had applied for or tried
to use previously and also whether they had actually obtained the finance they were
seeking- 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 only
18% of non-users had even attempted to source external finance the proportion
applying for each of the sources listed is low when you take the non-users as a
whole.
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 unsecured
loan. For the small proportion who had obtained both a secured and unsecured loan
we 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 had
obtained a loan (10%) had tried to access an overdraft facility, while small minorities
had attempted to gain loans or equity from directors or shareholders, or finance
through trade credit or via venture capital.
37
Focusing now on those who have sought finance only, the following tables show the
proportions of non-users who have applied for various types of external finance since
January 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%
- Don’t know/Refused 0% 1%
Did not apply for/try to use this form of finance 34% 68%
Business Bank Loan – Unsecured
Overdraft
Loans Or Equity From Directors Or Shareholders
Trade Credit
Venture Capital
38
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
Business Angel
Factoring
Other Form Of Finance
Of the non-users who have sought external finance, business bank loans were by far
the most commonly-explored routes, with the large majority of those applying for a
bank loan actually obtaining the full amount that they applied for.
39
6.1.2 Main Reasons For Seeking Finance
SFLG users and non-users who obtained a loan were asked to indicate all of the
purposes for which they were seeking finance and then to select the main reason for
doing so. The table below illustrates the responses.
Table 6.1.2 Main Reasons For Seeking Finance

All 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 company’s 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%
Don’t know/Refused 3% 4% 0% 1%
There were some marked differences evident in the reasons given by SFLG users
and non-users who obtained a loan for initially wanting to seek finance. The most
common 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 main
reason 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 from
the SFLG users in that the most common main reason why finance was sought was
to assist with the purchase of an asset (39%), followed by the need to provide the
company with working capital (28%). The desire to expand business premises was
also the most important reason for seeking finance for around an eighth (13%) of
non-users who had obtained a loan. Unlike the SFLG users, very few (8%) of the
non-users who had obtained a loan had done so to start-up their business.
40
6.1.3 Awareness Of SFLG Scheme
SFLG users and non-users who had obtained a loan were asked whether they were
aware 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 help
eligible 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-users
who 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, Don’t know/Can’t remember)

SFLG (441, 6%), Non-users obtaining loan (79, 3%)
Unsurprisingly SFLG users were significantly more likely than those obtaining a
conventional bank loan to be aware of the SFLG scheme. However, it was certainly
not the case that all SFLG users were aware of the scheme at the time of loan
application. Approaching three-fifths (57%) of SFLG users were aware of the SFLG
scheme 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 the
SFLG scheme.
41
6.1.4 Alternative Sources Of Finance Available
Only around a sixth (15%) of SFLG users believed there were alternative sources of
finance available to them when they first decided to apply for the loan guaranteed by
SFLG, although the majority (76%) indicated that they felt there were none.
The table below summarises the types of alternative finance perceived as being
available to SFLG users when they first decided to apply for, or were offered, the
loan guaranteed by the SFLG scheme, along with the proportion who actually applied
for each one and the proportion who were successful in their application.
Table 6.1.4.1 Alternative Sources Of Finance

SFLG Users Only
SFLG Users
Proportion
Sources Sources Applied Whose
Available For Application Was
Successful
Base 441 441 441
Bank loan – secured 5% 3% 1%

Loans or equity from directors or
3% 1% 1%
shareholders
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 finance
76% 76% 76%
available
Don’t know if alternative sources
9% 9% 9%
available
Of the SFLG users who believed that there were alternative sources of finance
available to them when they first decided to apply for the loan that was guaranteed
by SFLG, they were most likely to see a secured bank loan and loans or equity from
directors or shareholders as the main alternative sources of finance available to
them.
Approximately half of these then went on to actually apply for finance through these
two channels, with only a third of those applying for a secured bank loan being
accepted. However, these findings should be treated as indicative rather than
statistically significant, bearing in mind the small base sizes involved in actually
considering other finance sources. Very few SFLG users used the SFLG loan
alongside another source of finance. For example, only 6 out of 441 SFLG users
also used a secured business bank loan alongside the SFLG loan.
42
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 or
whether 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 SFLG
users specifically applied for a SFLG loan, while three-tenths (29%) were offered a
loan 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 user
businesses applied for funding for their specific project, from any source, before they
were given a SFLG guaranteed loan.
Chart 6.1.6 Number Of Occasions Applied For Funding For This Project (From Any
Source) Before Given A SFLG Guaranteed Loan
Base: All SFLG Users (Base, Don’t know/Refused)

SFLG (441, 6%)
For four-fifths (80%) of SFLG users, this represented their first loan application, while
a tenth (9%) had previously applied for finance from any source more than once
before.
43
The table below shows the number of times that SFLG users had applied for funding
for their specific project by the age of the business.
Table 6.1.4.2 Number Of Occasions Applied For Funding For This Project (From Any
Source) Before Given A SFLG Guaranteed Loan
By Age – SFLG Users Only
Age Of SFLG User Business

Less than 2
2-3 years 3-5 years Over 5 years
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%
Don’t know/can’t remember 3% 6% 10% 6%
Irrespective of age the table illustrates that the vast majority of SFLG users had only
applied this once for funding i.e. they had been successful on their first attempt at
seeking finance. However, the table does show that the slightly more established
firms are more likely to have needed to apply more than once for finance, with just
over a fifth of those established over 5 years having applied once or more before
compared with just a tenth of those established less than 2 years.
44
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 that
they talked about a SFLG guaranteed loan and also whether they felt the bank would
have 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 the
66%
need for a loan)
During the loan application process 22%
At the end of the application process 4%
Don’t know/Can’t remember 8%
Whether Believe The Bank Would Have Given You A Loan Without The
Guarantee From The SFLG Scheme:
Yes, definitely 4%
Yes, probably 11%
Probably not 14%
Definitely not 22%
No 1%
Don’t know/can’t remember 19%
Offered loan on proviso would take out SFLG loan
29%
guarantee
In two-thirds of cases, the subject of the SFLG guaranteed loan was talked about
right at the beginning of the discussions with the bank, with the majority of the
remainder recalling that the subject was first discussed during the loan application
process.
The guarantee from the SFLG scheme was viewed to have had an effect on the
bank’s decision to grant a loan to the business. More than a third (36%) of SFLG
users believed that the bank would either probably or definitely not given them a loan
without the guarantee from the SFLG scheme.
45
SFLG users were presented with a choice of three options and asked to indicate
which of them were cited by the bank as reasons why they should take out a SFLG
guaranteed 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, Don’t know)

SFLG (441, 5%, 12%)
The majority of SFLG users were told by the bank that they should take out a SFLG
loan because of reasons linked to lack of required security. In the main, this related
to a lack of required security because the firm was starting out (63% of users were
told this) but around a sixth (17%) were told they should apply for a SFLG loan as
they had exhausted all of their collateral due to existing loans.
The table below shows the reasons cited by the bank as reasons why the business
should 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 Loan

Less than 2
years
Lack of required security – because

80% 68% 53% 27%
you were starting out
Lack of required security – because
you had exhausted all of your 6% 18% 23% 33%
collateral due to existing loans
Insufficient track record 12% 19% 19% 19%
Don’t know 8% 14% 12% 21%
Unsurprisingly, for SFLG user firms that had only been established in the last 2
years, four-fifths (80%) were advised to take a SFLG guaranteed loan by the bank
46
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 to
existing loans was more likely to be given as a reason to firms that had been
established for longer than 5 years.
The table below shows the reasons given by banks for taking out a SFLG loan by the
size of the SFLG guaranteed loan.
Table 6.2.1.3 Reasons Cited By Bank As Reasons For Taking Out A SFLG Loan

£50,001- £100,000 or
Up to £50,000
£100,000 more
Lack of required security – because you

63% 69% 57%
were starting out
Lack of required security – because you
had exhausted all of your collateral due to 15% 15% 21%
existing loans
Insufficient track record 14% 15% 21%
Don’t 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 of
their collateral due to existing loans or due to their insufficient track record.
47
6.2.2 Assistance From The Bank – Loan Application
SFLG users and non-users who had obtained a loan were asked whether the bank
provided any help with the application for the loan or with their business plan when
they 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 With
Your 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%
As the table above shows, SFLG users were far more likely to have received some
form of help from the bank, mainly with their application, compared to non-users who
had obtained a conventional loan. Whilst only 26% of SFLG users stated that the
bank had not helped with either the application or the loan, this was the case for
almost two thirds (65%) of non-users who had obtained a loan.
48
6.3 Satisfaction With Bank Service Aspects
SFLG users and non-users who obtained a loan were asked to rate various aspects
of the bank loan application process that they had encountered – this section
summarises 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 firms’
business plans at the application stage.
Chart 6.3.1 Rating Of Help Provided By Bank On Business Plan
Base: All respondents (Base, Don’t know)

In the majority of cases, both SFLG users and non-users claim that the bank did not
provide 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 or
good.
49
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 assist
firms in preparing their loan application, including the guidance notes and other
printed or online materials.
Chart 6.3.2 Rating Of Help Provided By Bank On Application Preparation
Base: All respondents (Base, Don’t know)

Banks appeared to give more help to firms in terms of preparing business loan
applications compared to the help they were seen to give with business plans. There
is evidence to suggest that SFLG users may be slightly more likely to rate the help
given by the bank on the application process as either very good or good, with nearly
two-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.
50
6.3.3 Speed Of Bank Reaching Loan Decision
The chart below shows the responses given in terms of how quickly the bank
reached a decision on the firm’s loan. This measure is subjective as respondents
may have different perceptions on when the application process started.
Chart 6.3.3 Speed Of Bank Reaching Loan Decision
Base: All respondents (Base, Don’t know/Can’t remember)

There were some differences between SFLG users and non-users in terms of the
speed with which the bank reached a decision on the firm’s loan. In general, SFLG
users had to wait longer than non-users who obtained a loan for a decision on their
loan – two-fifths (41%) of non-users who obtained a loan stated that their bank
reached 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 their
decision, compared to just a quarter of non-users.
51
The table below shows the speed of the bank’s loan decision for SFLG users by the
size of the SFLG guaranteed loan.
Table 6.3.3 Speed Of Bank Reaching Loan Decision


£50,001- £100,000 or
Up to £50,000
£100,000 more
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%
Don’t know/Can’t 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 loan
compared to those applying for larger loans. Just under a quarter (23%) of SFLG
users applying for loans under £50,000 received a decision within 3 days, compared
to less than a tenth (9%) of businesses applying for larger loans of more than
£100,000.
52
6.3.4 Rating Of Overall Satisfaction Of Receiving SFLG Loan
The chart below shows the overall satisfaction recorded by SFLG users when
considering their total experience of receiving a loan guaranteed by the SFLG
scheme.
Chart 6.3.4 Overall Satisfaction With Receiving SFLG Loan
Base: All SFLG Users (Base, Don’t know/Can’t remember)

SFLG (441, 3%)
In general, SFLG users were satisfied with their total experience of receiving a loan
guaranteed by the SFLG scheme, with four-fifths (80%) giving either a very satisfied
or fairly satisfied rating. Only a small proportion (4%) expressed any form of
dissatisfaction with their overall experience of receiving this loan.
53
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 made
clear to the respondent by the bank.
Chart 6.3.5 Rating Of Clarity Of Nature Of Guarantee Given By Bank

SFLG (441, 6%)
In general, SFLG users believed that the information given by the bank about the
nature of the guarantee was made clear to them. Half (50%) stated that the nature of
the guarantee was made very clear to them, with a further fifth (22%) giving a rating
of ‘4’ out of 5. However, a small minority (7%) gave a low rating of either ‘1’ or ‘2’ out
of 5 for this aspect.
54
6.4 Sources Of External Advice Used
All businesses were asked whether they had used any external sources of
information, advice or support to help them develop their business over the last 2
years, 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 the
responses given.
Chart 6.4.1 Whether Used External Sources Of Information, Advice Or Support To

Help Develop The Business Over The Last 2 Years

SFLG users appear to be more likely than non-users to have used other sources of
information, advice or support to help them develop their business over the last 2
years, 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 other
sources, providing more evidence that firms who actively seek finance are more likely
to explore a number of sources to aid them in their general business development.
55
The table below summarises the nature of the external sources of information, advice
and support businesses have sought.
Table 6.4.1.1 Assistance That External Sources Of Information, Advice Or Support

Provided 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 of
59% 66% 79%
advice
Don’t know if used any external
1% 1% 1%
sources of advice
Both SFLG users and non-users were most likely to have received general business
advice from other sources (a third of SFLG users received general business help, a
quarter 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.
56
The table below shows the specific sources of external information, advice and
support used by businesses over the last 2 years (top mentions only). The pattern of
usage is similar between users and non-users, with most commonly-used sources
amongst SFLG user firms being Business Links, followed by accountants and banks.
Table 6.4.1.2 Sources Of External Information, Advice Or Support Used – Top

Mentions 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%
Don’t know/Can’t remember 1% 1% 1%
Not used any external sources of
59% 66% 79%
advice
Don’t know if used any external
1% 1% 1%
sources of advice
There were no significant differences in the use of external sources of finance

between SFLG users who were already aware of the SFLG scheme before they
approached the bank for finance and those firms that were not aware of the scheme.
57
6.5 Further Finance Applications Since Obtaining SFLG Loan
SFLG users were asked whether they had applied for any further significant levels of
funding or financial backing for their business since obtaining the SFLG guaranteed
loan, 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 Loan
SFLG Users Only
SFLG Users
Total
Base 441
Whether Applied For Any Further Significant Levels Of Funding Or
Financial Backing For Business Since Obtaining SFLG Guaranteed Loan:
Yes 21%
No 77%
Don’t 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%
Don’t 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%
Don’t know/can’t remember 0%
No finance obtained 3%
(Application still pending) 1%
Don’t know success of application 0%
A fifth (21%) of SFLG users had applied for further significant levels of funding or
financial backing since obtaining their SFLG guaranteed loan. Of these, the majority
were 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
58
secured loans, unsecured loans or overdrafts, with only a small minority using other
sources.
The table below summarises the perceived effects that receiving a SFLG loan have
had on recipients.
Table 6.5.1.2 Effects Of Receiving SFLG Loan – Summary

SFLG Users Only
SFLG Users
Total
Base 441
Whether Feel Success In Obtaining Further Finance Was Influenced By
Fact That Previously Received A SFLG Guaranteed Loan:
Yes 9%
No 6%
Don’t know 2%
No finance obtained 3%
Application still pending 1%
Don’t know success of application 0%
Whether Would Be More Confident In Ability To Secure External Finance
As A Direct Result Of Receiving SFLG Guaranteed Loan:
Yes 76%
No 20%
Don’t know 4%
Those that were successful in obtaining any finance since obtaining the SFLG
guaranteed loan (76 respondents) were asked if they felt their success in obtaining
further finance was in any way influenced by the fact that they had previously
received an SFLG guaranteed loan. Just over half of these (equating to 9% of the
total SFLG user sample) believed that this did have an influence on them receiving
further 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 to
secure external finance as a direct result of receiving the SFLG loan. The majority of
SFLG users reported this had been an effect, with three-quarters (76%) of SFLG
users saying their confidence has increased.
59
7. Impacts & Outcomes
This section summarises the various impacts and outcomes experienced by SFLG
users 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 possible
ways in which their business may have benefited from receiving either a loan
guaranteed by the SFLG scheme (in the case of SFLG users) or a bank loan (in the
case 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 of
receiving either the SFLG loan or the bank loan. For each one that has been, or will
be, a benefit, they were then asked to rate the extent to which this has been or will be
a benefit, on a scale of 1 to 5 where 5 was ‘to a critical extent’ and 1 meant ‘to no
extent’.
An overall summary of the proportions giving a ‘4’ or ‘5’ out of 5 rating for these
aspects 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 Aspects

Proportion Giving A Score Of ‘4’ Or ‘5’ Out Of 5 For Each Aspect

SFLG (441, 1%-5%), Non-users obtaining loan (79, 1%-4%)
60
As the chart illustrates, the most commonly reported benefit of the SFLG loan
amongst 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 benefits
experienced 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’, with
only 10% giving this a ‘4’ or ‘5’ out of 5 rating.
Although the pattern of benefits amongst non-users who had obtained a loan was
generally similar to that seen for SFLG users, the main difference is that non-users
who had obtained a loan were far less likely to have experienced a significant benefit
in 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 as
such the rating of ‘provided capital – to get started’ was not asked to the majority of
non-user firms.
The remainder of this section provides a breakdown of the individual ratings given for
each potential benefit and presents these in the three key themed groupings of
‘innovations’, ‘provision of capital’ and ‘financial business performance measures’.
Each of the following charts shows the proportion giving a score of between 1 and 5
to each element, with those stating that the element had not been a benefit being
automatically coded as ‘1 – to no extent’. Results are shown net of non-additionality,
with those saying that they ‘would have achieved similar business outcomes anyway’
at the main generic additionality question (question number D5) reported separately
in each chart as ‘non-additional’.
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7.1.2 Innovation
SFLG users and non-users who had obtained a loan were asked to indicate whether
the following benefits relating to the introduction of new products, processes and
technologies had been, or were expected to be experienced:
• New or significantly improved products or services;

• New or significantly improved processes; and
• New technology.
7.1.2.1Introduction Of New Or Significantly Improved Products Or Services
The chart below summarises the proportions feeling that the ‘introduction of new or
significantly improved products or services’ was a benefit that their business had
experienced, or expected to experience, as a direct result of receiving either the loan
guaranteed by the SFLG scheme or the bank loan.
Chart 7.1.2.1 Benefit Of SFLG Loan/Bank Loan

Introduction Of New Or Significantly Improved Products Or Services

More than a third (35%) of SFLG users, and a similar proportion of non-users who
had obtained a loan (34%), indicated that they had benefited to a significant extent
(i.e. giving a score of 4 or 5 out of a possible 5) for introduced new or significantly
improved products or services as a result of receiving the SFLG loan or the bank
loan. However, for more than two-fifths, this was not a benefit that had either been
felt, or was expected to be felt, as a direct result.
62
7.1.2.2Introduction Of New Or Significantly Improved Processes
The chart below summarises the proportions reporting the ‘introduction of new or
significantly improved processes’ was a benefit that their business had experienced,
or expected to experience, as a direct result of receiving either the loan guaranteed
by the SFLG scheme or the bank loan.

Introduction Of New Or Significantly Improved Processes

Around a fifth of SFLG users (20%) and non-users who had obtained a loan (22%),
indicated that they had benefited to a significant extent from the introduction of new
or significantly improved processes as a result of receiving the SFLG loan or the
bank loan, or were expecting to do so in the future. However, for more than half of
SFLG users (56%) and two-thirds of non-users who had obtained a loan (65%), this
was not a benefit at all.
63
7.1.2.3Introduction Of New Technology
The chart below summarises the proportions reporting the ‘introduction of new
technology’ was a benefit that their business had experienced, or expected to
experience, as a direct result of receiving either the loan guaranteed by the SFLG
scheme or the bank loan.

Introduction Of New Technology

Nearly a quarter of SFLG users (23%), and a similar proportion of non-users who had
obtained a loan (23%), indicated that they had benefited to a significant extent from
the introduction of new technology as a result of receiving the SFLG loan or the bank
loan, or were expecting to do so in the future.
However, for more than half of SFLG users (57%) and two-thirds of non-users who
had obtained a loan (66%), this was not a benefit that had either been felt, or was
expected to be felt, as a direct result.
64
7.1.3 Provision Of Capital
the following benefits relating to the provision of capital had been, or were expected
to be, experienced:
• Providing some (or all) of the initial capital needed to get the business started;
• Providing some (or all) of the initial capital needed to purchase premises; and
• Providing some (or all) of the capital needed to purchase equipment.
7.1.3.1Provision Of Some (Or All) Of The Initial Capital Needed To Get The Business
Started
The chart below summarises the proportions feeling that the ‘provision of some (or
all) of the initial capital needed to get the business started’ was a benefit that their
business had experienced, or expected to experience, as a direct result of receiving
either the loan guaranteed by the SFLG scheme or the bank loan. Only those firms
who indicated that a reason for them seeking finance was to fund their business
start-up were asked this rating – those for whom this wasn’t a reason for finance
were automatically coded as 1 – to no extent.

Provision Of Some (Or All) Of The Initial Capital Needed To Get The Business
Started

Reflecting the different reasons for seeking finance in the first place, SFLG users
were far more likely to see this as a benefit compared to non-users who had obtained
a loan, with more than a third (36%) of SFLG users indicating that they had benefited
65
to a significant extent from this aspect, compared to only 4% of non-users who had
obtained a loan.
For nearly nine-tenths (87%) of these non-users, this was not a benefit that had
either been felt, or was expected to be felt, as a direct result of the loan.
7.1.3.2Provision Of Some (Or All) Of The Initial Capital Needed To Purchase

Premises
The chart below summarises the proportions reporting the ‘provision of some (or all)
of the initial capital needed to purchase premises’ was a benefit that their business
had experienced, or expected to experience, as a direct result of receiving either the
loan guaranteed by the SFLG scheme or the bank loan.

Provision Of Some (Or All) Of The Initial Capital Needed To Purchase Premises

A fifth (20%) of SFLG users, and a slightly smaller proportion of non-users who had
obtained a loan (13%), indicated that they had benefited to a significant extent from
the loan providing some or all of the initial capital needed to purchase premises, or
were expecting it to be a benefit in the future. However, for three-fifths (61%) of
SFLG users and almost three quarters (73%) of non-users who had obtained a loan,
this was not a benefit that had either been felt, or was expected to be felt, as a direct
result.
66
7.1.3.3Provision Of Some (Or All) Of The Initial Capital Needed To Purchase

Equipment
The chart below summarises the proportions reporting the ‘provision of some (or all)
of the initial capital needed to purchase equipment’ was a benefit that their business
had experienced, or expected to experience, as a direct result of receiving either the
loan guaranteed by the SFLG scheme or the bank loan.

Provision Of Some (Or All) Of The Initial Capital Needed To Purchase Equipment

This was the most highly rated benefit amongst both SFLG users and non-users who
had obtained a loan. More than two-fifths (41%) of SFLG users and a similar
proportion of non-users who had obtained a loan (41%), indicated that they had
benefited to a significant extent (i.e. giving a score of 4 or 5 out of a possible 5) from
the loan providing some or all of the initial capital needed to purchase equipment, or
were expecting it to be a benefit in the future.
Only in a third of cases did SFLG users and non-users who had obtained a loan feel
that this was not a benefit that had either been felt, or was expected to be felt, as a
direct result.
67
7.1.4 Financial Business Performance Measures
the following benefits relating to financial business performance measures had been,
or were expected to be, experienced:
• Reduced costs;
• Increased sales; and
• Increased productivity (value added per employee).
7.1.4.1Reduced Costs
The chart below summarises the proportions reporting ‘reduced costs’ was a benefit
that their business had experienced, or expected to experience, as a direct result of
receiving either the loan guaranteed by the SFLG scheme or the bank loan.

Reduced Costs

A tenth (10%) of SFLG users, and a slightly larger proportion of non-users who had
obtained a loan (15%), indicated that they benefited to a significant extent from
reduced costs, or were expecting it to do so in the future, as a direct result of the
loan. However, for more than two-thirds (68%) of both SFLG users and non-users
who had obtained a loan (67%), this was not a benefit that had either been felt, or
was expected to be felt, at all as a direct result.
68
7.1.4.2Increased Sales
The chart below summarises the proportions feeling that ‘increased sales’ is a benefit
that their business has experienced, or expects to experience, as a direct result of
receiving either the loan guaranteed by the SFLG scheme or the bank loan.

Increased Sales

Approaching two-fifths (38%) of both SFLG users and non-users who had obtained a
loan (38%), indicated that they had benefited to a significant extent from increases
sales, or were expecting it to do so in the future.
Just over a third (37%) of SFLG users and non-users who had obtained a loan (35%)
believed that this was not a benefit at all that had either been felt, or was expected to
be felt, as a direct result.
69
7.1.4.3Increased Productivity (i.e. Value Added Per Employee)
The chart below summarises the proportions reporting ‘increased productivity’ is a

benefit that their business has experienced, or expects to experience, as a direct
result of receiving either the loan guaranteed by the SFLG scheme or the bank loan.

Increased Productivity

Nearly a quarter (24%) of SFLG users, and a slightly smaller proportion of non-users
who had obtained a loan (22%), indicated that they had benefited to a significant
extent from increased productivity, or were expecting it to do so in the future.
However, for around a half of SFLG users (49%) and non-users who had obtained a
loan (52%), this was not a benefit that had either been felt, or was expected to be
felt, as a direct result.
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7.2 Additionality
7.2.1 Overview
In order to assess the impact and outcomes of the receipt of either SFLG or bank
funding, a number of additionality questions were asked relating to:
• Generic additionality;
• Activity additionality;
• Timing additionality;
• Scale additionality; and
• Scope additionality.
Although a generic measure of additionality has been used as the key indicator of
additionality levels for SFLG users and non-users who have obtained a loan, in order
to assess the impact and outcomes of the receipt of either SFLG or bank funding,
this section summarises all of the different additionality measures calculated.
7.2.2 Generic Additionality
Businesses were asked whether or not they felt that they would achieve similar
results anyway had they not received either the SFLG funding or the bank loan – a
summary of the findings is shown in the following chart.
Chart 7.2.2 Generic Additionality
Base: All respondents (Base, None of these)

71
More than two-fifths (43%) of SFLG users can be classified as ‘fully additional’ via
this generic measure (i.e. they feel that they probably or definitely would not have
achieved similar results without the SFLG guaranteed loan). A slightly smaller
proportion of non-users who had obtained a loan (38%) can be classified as fully
additional.
Whilst most of the remainder can be judged to be ‘partially additional’, almost a tenth
of SFLG user firms (9%) and a slightly smaller proportion of non-users who had
obtained a loan (5%) believed that they would have achieved similar business
outcomes anyway (i.e. they are ‘non-additional’).
The table below shows the differences in generic additionality by age of business.
Table 7.2.2 Generic Additionality


Less than 2
years
We definitely would not have

28% 23% 15% 11%
achieved similar business outcomes
We probably would not have
19% 24% 21% 24%
achieved similar business outcomes
Proportion ‘fully additional’ 46% 47% 37% 35%
We would have achieved some but
14% 15% 15% 30%
not all of the outcomes
We would have achieved similar
business outcomes, but not as 24% 32% 42% 24%
quickly or easily
Proportion ‘partly additional’ 38% 47% 57% 54%
We would have achieved similar
business outcomes anyway 15% 5% 3% 8%
i.e. ‘non-additional’
None of these 1% 1% 3% 3%
Amongst SFLG users there is some evidence to suggest that businesses established
for less than 2 years may be more likely than older firms to feel that the SFLG loan
was ‘fully’ additional. Nearly half (46%) of SFLG users established within the last 2
years believed that they would definitely or probably not have achieved similar
business outcomes without the SFLG loan – this figure falls to only 35% amongst
SFLG users established more than 5 years ago.
However, it is not the case that older SFLG user businesses are more likely to be
‘non-additional’, i.e. they feel they would have achieved similar business outcomes
anyway, with this proportion in fact being highest amongst those established in the
last 2 years (15% compared with just 3% of those aged 3-5 years).
72
7.2.3 Activity Additionality
Businesses were asked whether or not they would have gone ahead with the project
or start-up that the loan funded in the absence of the SFLG guaranteed loan or the
bank loan – a summary of these findings is shown below.
Chart 7.2.3 Activity Additionality

Almost half (49%) of SFLG users can be classified as ‘fully additional’ via this activity
additionality measure (they feel that they probably or definitely would not have gone
ahead with the project or start-up that the SFLG loan funded in the absence of this
loan). However, a larger proportion of non-users who had obtained a loan (65%) can
be classified as fully additional, saying that they probably or definitely would not have
gone ahead with the project or start-up without the bank loan.
Using this view of additionality, a fifth (20%) of SFLG user firms and 15% of non-
users who had obtained a loan felt that they would definitely have gone ahead with
the project regardless, i.e. indicating that they are non-additional.
73
The table below shows the differences in activity additionality by age of business.
Table 7.2.3 Activity Additionality


Less than 2
years
We would definitely not have gone

ahead with the project or start-up 29% 28% 30% 33%
without the SFLG guaranteed loan
We would probably not have gone
We would possibly have gone
We would probably have gone
Proportion ‘partly additional’ 26% 25% 20% 27%
We would definitely have gone
ahead with the project or start-up
23% 18% 21% 17%
i.e. ‘non-additional’
Don’t know 2% 9% 8% 5%
There were no statistically significant differences evident in activity additionality by

SFLG user age group.
74
7.2.4 Timing Additionality
bank loan and if so, whether the project would have taken place earlier than it did,
later than it did or the same time as it did. A summary of these findings is shown
below.
Chart 7.2.4 Timing Additionality

As seen previously, almost half (49%) of SFLG users and 65% of non-users who had
obtained a loan can be classified as ‘fully additional’ via the activity additionality
measure. A further fifth (21%) of SFLG users believed that without the SFLG loan,
the project would have started later than it actually did, compared to 13% of non-
users who obtained a loan and feeling the same way. However, for around a fifth of
both users and non-users, the project would have started at the same time,
regardless of whether the loan was received or not.
75
The table below shows the differences in timings additionality by age of business.
Table 7.2.4 Timings Additionality


Less than 2
years

Don’t know whether would have
gone ahead with the project or start-
2% 9% 8% 5%
up without the SFLG guaranteed
loan
Project would have taken place
19% 21% 20% 25%
later than it did
Project would have taken place at
28% 16% 20% 16%
the same time as it did
Project would have taken place
1% 4% 0% 2%
earlier than it did
Don’t know 1% 2% 1% 2%
Generally, there were no significant differences evident by the age of SFLG user
businesses in terms of timings additionality. However, there is some evidence to
suggest that younger firms established in the last 2 years may be slightly less likely
to feel that the project would have taken place later without the loan and instead
more likely to feel that it would have taken place at the same time.
76
7.2.5 Scale Additionality
bank loan and if so, whether the project would have been larger, smaller or no
different in scale. A summary of these findings is shown below.
Chart 7.2.5 Scale Additionality

measure. In addition to this, around a sixth of both SFLG users (14%) and non-users
who had obtained a loan (13%) believed that without the loan the project would have
been smaller in scale than it actually was.
However, for around three-tenths of users (29%) and a fifth of non-users (20%), the
project would have been on the same scale, regardless of whether the loan was
received or not.
77
The table below shows the differences in scale additionality by age of business.
Table 7.2.5.1 Scale Additionality


Less than 2
years

2% 9% 8% 5%
loan
Project would have been smaller in
scale without the SFLG guaranteed 13% 10% 16% 22%
loan
There would have been no
difference in project scale without 33% 30% 23% 22%
the SFLG guaranteed loan
Project would have been larger in
scale without the SFLG guaranteed 2% 0% 1% 0%
loan
Don’t know 1% 3% 1% 0%
There is some evidence to suggest that more experienced firms established more
than 5 years ago may be slightly more likely to have had the scale of their project
affected positively by the SFLG loan than newly-established businesses - more than
a fifth (22%) of firms over 5 years old felt the project would have been smaller in
scale without the SFLG guaranteed loan, compared to only 13% of newly-established
companies.
78
Businesses believing that the project or business start-up would have been smaller in
scale without either the SFLG guaranteed loan or the bank loan were asked to
estimate how much smaller the investment would have been without it. The table
below summarises the responses given.
Table 7.2.5.2 How Much Smaller Would Investment Have Been Without Loan

Total Obtained Loan
441 79
Up to 10% smaller 1% 1%
10%-25% smaller 2% 8%
26%-50% smaller 7% 1%
51%-75% smaller 2% 0%
More than 75% smaller 0% 0%
Don’t know 1% 3%
Probably would not have gone ahead without loan 20% 22%
Definitely would not have gone ahead without loan 30% 43%
Don’t know if would have gone ahead without loan 5% 3%
Project would be larger without loan 1% 0%
Project would be no different without loan 29% 20%
Don’t know if scale would be different without loan 1% 0%
The majority of SFLG user firms who felt that the project or investment would have
been smaller in scale without the SFLG loan indicated that it would have been more
than 25% smaller. This contrasts with the opinions of non-users who obtained a loan
and felt that the investment would have been smaller without their bank loan, who
generally felt that the investment would have been less than 25% smaller without this
loan. However, caution should be exercised when examining this finding due to the
low sample sizes involved, and should be treated as indicative rather than statistically
significant.
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7.2.6 Scope Additionality
bank loan and if so, whether the project would have been broader, narrower or no
different in terms of scope. A summary of these findings is shown below.
Chart 7.2.6 Scope Additionality

measure. In addition to this, around a tenth (10%) of SFLG users believed that
without the SFLG loan, the project would have been narrower in scope than it
actually was, compared to 6% of non-users who obtained a loan. However, for a
third of users (33%) and a quarter of non-users (24%), the project would have been
no different in scope, regardless of whether the loan was received or not.
80
The table below shows the differences in scope additionality by age of business.
Table 7.2.6 Scope Additionality


Less than 2
years

2% 9% 8% 5%
loan
Project would have been narrower
in scope without the SFLG 9% 9% 11% 13%
guaranteed loan
There would have been no
difference in project scope without 37% 32% 29% 27%
the SFLG guaranteed loan
Project would have been broader in
scope without the SFLG guaranteed 2% 0% 1% 2%
loan
Don’t know 1% 2% 1% 3%
There were no differences when looking at scope additionality by age of business.

81
7.2.7 Finance Additionality
SFLG user businesses were asked whether or not the bank would have given them a
loan without the guarantee from the SFLG scheme. A summary of these findings is
shown below.
Chart 7.2.7 Finance Additionality

SFLG (441, 19%),
The effect of the SFLG scheme in terms of helping businesses to obtain finance was
viewed by a significant proportion of SFLG users as an important influence on their
ability to gain finance, with more than a third (36%) of SFLG users believing that they
probably or definitely would not have been granted a loan from the bank without the
guarantee from the SFLG scheme. A further 29% had already stated that the loan
was offered only on the proviso that they would take out the SFLG guarantee.
However, around a sixth (15%) felt that the SFLG scheme guarantee had no real
influence on the granting of bank finance in this instance, believing that they would
have either probably or definitely been given a loan by the bank without the SFLG
loan guarantee.
82
The table below shows the differences in finance additionality by age of business.
Table 7.2.7 Finance Additionality

Whether Bank Would Have Given Loan Without The Guarantee From The SFLG
Scheme

Less than 2
years
Definitely not 18% 24% 26% 32%

Probably not 14% 13% 16% 14%
Yes, probably 11% 10% 12% 10%
Yes, definitely 4% 2% 6% 5%
Offered loan on proviso would take
33% 32% 20% 24%
out a SFLG guarantee
Don’t know 20% 19% 19% 16%
Businesses aged over 5 years were more likely than younger businesses to feel that
their bank would definitely not have given them a loan without the guarantee from the
SFLG scheme, with a third (32%) of older firms believing this was the case,
compared to only 18% of companies aged under 2 years.
83
7.3 Other Benefits Of SFLG To Firms
In addition to the benefits already outlined in Section 7, the questionnaire also

addressed other areas of potential benefit to both SFLG users and non-users.
7.3.1 Increased Confidence In Securing Future External Finance
SFLG users were asked whether they would be more confident of securing additional
external finance in the future as a direct result of their experiences of receiving the
SFLG loan.
Chart 7.3.1 Confidence In Ability To Secure Direct Finance As A Direct Result Of

Receiving The SFLG Loan

SFLG (441, 4%),
The SFLG loan guarantee appears to have had a positive effect on the businesses
who have obtained a loan backed by the scheme, with three-quarters (76%) of SFLG
users saying that they would be more confident in securing direct finance in the
future due to their experiences in taking out an SFLG guaranteed loan.
84
7.3.2 Employment Growth
All businesses were asked to indicate the number of people they currently employed
in the UK. They were then asked whether there were fewer, more, or the same
number of people employed by their company 2 years ago (i.e. in August 2006) and
then were asked whether there were fewer, more or the same number of people
employed by their company 4 years ago (i.e. August 2004) compared to the number
given for August 2006. From this information, a calculation was made to summarise
whether their employment levels had increased, stayed the same or decreased over
this 4 year period, and if so, by what proportion. This information is summarised in
the chart below.
Chart 7.3.2.1 Extent To Which Employment Numbers Have Increased
Base: All respondents (Base, Don’t know/Refused, Not yet trading <2 years)
SFLG (441, 2%, 3%), Non-users obtaining loan (79, 3%, 16%), All Non-users (1026, 4%, 11%)
More than half (56%) of SFLG user firms had experienced an increase in the number
of people employed by their firm over the period in question – this compares to 35%
of both non-user companies who had obtained a loan and the non-user sample as a
whole. Only a tenth (10%) of SFLG user businesses had experienced a decrease in
employment numbers over this period, compared to a higher proportion of non-users
who had obtained a loan (20%).
85
Following these questions, SFLG users and non-users who had obtained a loan were
asked to estimate what percentage of the increase in employment numbers over the
last 4 years they would attribute to the SFLG loan or bank loan. A summary of the
responses, based only on those who experienced an increase in employment
numbers, is shown in the chart below. Caution should be taken when reading these
figures, particularly for the non-user group, as the results are based only on those
experiencing an increase and as such the sample size is reduced significantly.
Chart 7.3.2.2 Employment Increase Attributable To SFLG Loan
Base: All respondents experiencing increase in employment (Base, Don’t know/Refused)

Around two-thirds (68%) of SFLG users experiencing an employment increase

attributed at least some of their employment increase to the SFLG loan, compared
with just three-fifths of non-users. Approaching three-tenths (28%) of SFLG users
whose employment numbers had increased attributed more than 80% of this
increase to the SFLG loan, compared to 15% of non-users expressing the same
opinion.
However, comparisons between the groups on this aspect should be treated with
caution due to the low base size for non-users who obtained a loan.
Of the 46 SFLG user businesses for whom employee numbers had decreased over
the last 4 years (12% of all SFLG users), half believed that jobs would have been lost
without the SFLG loan or the bank loan, most commonly in the region of 1-4 jobs.
86
7.3.3 Turnover Growth
All businesses were asked to indicate the current annual turnover of their business.
They were then asked whether their annual turnover was lower, higher, or the same
as it was 2 years ago (i.e. in August 2006) and then were asked whether their annual
turnover was lower, higher or the same 4 years ago (i.e. August 2004) compared to
the turnover figure they gave for August 2006. From this information, a calculation
was made to summarise whether the company’s annual turnover had increased,
stayed the same or decreased over this 4 year period, and if so, by what proportion.
This is summarised in the chart below.
Chart 7.3.3.1 Extent To Which Turnover Has Increased
Base: All respondents (Base, Don’t know/Refused, Not yet trading <2 years)
SFLG (441, 2%, 3%), Non-users obtaining loan (79, 3%, 16%), All Non-users (1026, 4%, 11%)
More than two-thirds (68%) of SFLG user firms had experienced an increase in
turnover over the period in question – this compares to just over half (52%) of non-
user companies who had obtained a loan and two-fifths (42%) of the non-user
sample as a whole. Less than a tenth (8%) of SFLG user businesses had
experienced a decrease in turnover over this period, compared to a slightly higher
proportion of non-users who had obtained a loan (13%) and 15% of all non-users.
87
Following these questions, SFLG users and non-users who had obtained a loan were
asked to estimate what percentage of the increase in turnover over the last 4 years
they would attribute to the SFLG loan or bank loan. A summary of the responses,
based only on those who experienced an increase in turnover, is shown in the chart
below. As the chart below is only based on those who have experienced an increase
in turnover the base sizes fall and as such caution should be taken when comparing
results particularly for the non-user group.
Chart 7.3.3.2 Turnover Increase Attributable To SFLG Loan
Base: All respondents experiencing increase in turnover (Base, Don’t know/Refused)

There are no great differences between SFLG users and non-users who had
obtained a loan in relation to turnover increases being attributable to either the SFLG
loan or the bank loan. A quarter of SFLG users experiencing turnover increases
attributed at least some of this increase to the SFLG loan, which is a similar
proportion to that of the non-users who had obtained a loan. A quarter (26%) of
SFLG users whose turnover had increased attributed more than 80% of this increase
to the SFLG loan, compared to 14% of non-users who felt the same way.
Again, comparisons between the groups on this aspect should be treated with
caution due to the low base size for non-users who obtained a loan.
88
7.3.4 Future Growth Prospects
SFLG users and non-users who have obtained a loan were asked whether the future
growth prospects of their business have improved as a result of either the SFLG
guaranteed loan or the bank loan.
Chart 7.3.4 Whether Future Growth Prospects Of Business Have Improved As A

Result Of SFLG Loan/Bank Loan

As has already been seen, the SFLG loan guarantee appears to have had a positive
effect on the businesses who have obtained a loan backed by the scheme, with four-
fifths (81%) of SFLG users saying that the receipt of the SFLG guaranteed loan had
either a ‘very’ or ‘fairly’ positive influence on the future growth prospects of the
business. A similar proportion of non-users who obtained a bank loan (77%)
expressed the same positive view.

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Department for Business, Innovation & Skills (BIS)

Small Firms Loan Guarantee (SFLG) Scheme Recipient

The research was conducted by OMB Research and utilised a telephone

The main objectives of this particular study are to discover:

• How the characteristics of businesses using SFLG differ from the

3. Summary Of Key Findings

3.1 Usage & Awareness Of SFLG

The SFLG scheme appears to be an important first step in financing businesses, as

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

3.2 Experiences Of SFLG

3.3 Benefits Of SFLG To Firms

3.4 Benefits Of SFLG To Economy

Table 4.1 Survey Coverage

‘Don’t know’ or ‘Not answered’ Responses

4.1 Sample Groups

4.1.1 SFLG Users (i.e. Beneficiaries)

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

4.2 Sample Groups For Analysis

Non-Users – Obtained Loan:

5.1 Age Of Business

Chart 5.1 Age of Business

Base: All respondents (Base, Don’t know/Refused)

5.2 Size Of Business

Chart 5.2 Size of Business

Base: All respondents (Base, Don’t know/Refused)

5.3 Legal Status Of Business

Table 5.3.1 Legal Status Of Business & How Established

SFLG Users Non-Users

Base: All respondents 441 79 1,026

Legal Status Of Business:

5.4 Industry Sector

Chart 5.4 Industry Sector

Base: All respondents (Base)

5.5.1 Business Region

Table 5.5.1 Business Region

SFLG Users Non-Users

Base: All respondents 441 79 1,026

5.5.2 Deprived Areas

Chart 5.5.2 Whether Business Is In A Deprived Area

5.6 Annual Turnover

Chart 5.6 Annual Turnover

Base: All respondents (Base, Don’t know/Refused)

5.7 Management Profile

5.7.1 Management Profile - Composition

Respondents were asked a number of questions about their management structure

Table 5.7.1 Management Profile – Composition Summary

SFLG Users Non-Users

Base 441 79 1,026

5.7.2 Management Profile - Skills

Table 5.7.2 Management Profile – Skills Summary

SFLG Users Non-Users

Base 441 79 1,026

educated to degree-level or higher, compared to 42% of non-users. However, it is

There is however, an indication that SFLG users have displayed a more

5.8 Export Experience

Chart 5.8 Whether Business Currently Exports Overseas

Base: All respondents (Base, Don’t know/Refused)

5.9 Strategic Direction Of The Business

Businesses were asked a number of questions to ascertain the strategic direction of

5.9.1 Current Growth Objectives

Base: All respondents (Base, Don’t know/Refused)

Despite the prevailing economic conditions, the majority of businesses interviewed

5.9.2 Business Aspirations

Chart 5.9.2 Key Focus For The Business At This Time