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6 Factors associated with growth
This section looks at factors associated with growth, in particular:
- Access to finance.
- Innovation.
- Exporting.
- Training.
- Use of ICT.
6.1 Access to finance
A quarter of Scottish SME employers (25 per cent) had tried to obtain finance for their business in the 12 months prior to participating in the survey. 14 per cent had tried once only and nine per cent more than once.
Medium-sized employers were more likely to have sought finance (46 per cent) than small businesses (38 per cent) and micro-employers (22 per cent).
The main reasons that SME employers looked for finance were the need for working capital or cash flow (30 per cent) and to acquire capital equipment and vehicles (28 per cent). One in six (17 per cent) sought finance for the purchase of land or buildings.
Chart 6.1 Reasons for seeking finance in the past 12 months
Base: SME employers in Scotland that tried to obtain finance in past 12 months (weighted data); unweighted N-282
6.2 Types of finance sought
The most common type of finance sought was bank loans (46 per cent of SME employers who had sought finance). Slightly less than a quarter of SME employers had sought to negotiate bank overdrafts (23 per cent) with about half that proportion using leasing or hire-purchase agreements (10 per cent).
The amount of finance sought by businesses varied widely (see Chart 6.2). The most frequently sought amount was between £100,000 and £249,999. A small minority of SME employers sought sums in excess of £1 million (four per cent of all SME employers).
Chart 6.2 Amount of finance sought in the past 12 months
Base: All SMEs in Scotland that sought finance in past 12 months (weighted data); unweighted N- 282
6.3 Difficulties obtaining finance
In the year preceding the survey, most Scottish SME employers who sought to raise finance had no problem obtaining it from the first source they tried (74 per cent), eight per cent obtained some or all of the finance they required with difficulty. One in nine (11 per cent) of businesses that sought finance were unable to obtain any finance. Just under two-thirds (63 per cent) of the businesses that reported difficulties accessing finance from the first source they approached, eventually went on to obtain the finance they needed.
SME employers that experienced difficulties in obtaining finance reported a wide range of reasons for this. The most cited reasons are shown in Table 6.1.
Table 6.1 Main reasons for difficulties obtaining finance
| per cent |
|---|
No security | 13 |
|---|
No reason given | 11 |
|---|
Poor business performance / profit margins | 11 |
|---|
Insufficient security | 10 |
|---|
No credit history/not in business long enough | 10 |
|---|
Time consuming with administrative procedures | 8 |
|---|
Regulations | 6 |
|---|
Wrong business sector | 5 |
|---|
Provided insufficient application details | 5 |
|---|
Business is too small | 5 |
|---|
Funding reached available limit (competition for funding) | 4 |
|---|
Inadequate business plan | 4 |
|---|
Business sector to risky | 1 |
|---|
Too many outstanding loans/mortgages | 1 |
|---|
Applied for too little | 1 |
|---|
Base: all SMEs in Scotland that had difficulty seeking finance in the past 12 months (weighted data); unweighted N- 66
6.4 Innovation
Slightly more than half of Scottish SME employers (52 per cent) had introduced new or significantly improved products and services in the past 12 months. Of these, 74 per cent introduced innovations that were simply new to the business and 25 per cent had introduced innovations that were completely new.
A third of SME employers (34 per cent) had introduced significantly improved or new processes to their business. Of these, three-quarters (78 per cent) had introduced processes which were new to the business, and one fifth (20 per cent) had introduced processes which were completely new.
Both product or service and process innovation tend to increase with firm size.
6.5 Exporting and competition from overseas
One in five SME employers in Scotland (20 per cent) exported their products or services.
Exporting activity increased with the size of the business; 19 per cent of micro-sized employers exported, compared to 22 percent of small-sized and 43 per cent of medium-sized employers.
One in six SME employers (16 per cent) reported at least some competitive threat from overseas and eight per cent reported overseas competition to be a serious threat to their business. Medium-sized businesses were more likely to report competition from overseas as a threat at all, whether a serious or a slight threat (28 per cent, compared to 22 per cent of small employers and 15 per cent of micro-employers).
6.6 Training
Somewhat more than half of SME employers in Scotland (60 per cent) had funded or arranged staff training or development over the 12 months prior to their interview
The larger a business was, the more likely it was to fund or arrange staff training; just over half (55 per cent) of micro-sized businesses funded or arranged training, whereas over four-fifths of small and medium-sized businesses did so (82 per cent and 93 per cent respectively).
Only one per cent of SME employers which had tried to secure external finance in the past 12 months were doing so in order to fund training for their staff.
In 47 per cent of cases, at least some of the training taking place was designed to lead to a qualification. In 24 per cent of cases the training was mostly designed to lead to a qualification. Medium sized employers were more likely to fund or arrange training leading to a qualification than small or micro-sized employers.
Only 25 per cent of respondent businesses provided training for their managers and just 12 per cent of all SME employers trained all of their management team. Seven out of ten medium-sized employers provided leadership or management training for at least some of their managers (70 per cent) but rates were much lower in small and micro businesses.
6.7 Use of ICT
Nearly nine out of ten Scottish SME employers use computers in their business (88 per cent). Computers are almost universal among businesses with more than ten employees (98 per cent). Women-led and MEG-led SME employers were significantly less likely to use computer technology in their business (21 per cent of women-led businesses and 27 per cent of MEG-led businesses did not use computers).
More than three quarters of SME employers (78 per cent) make use of the Internet. The main things that the Internet is used for is communication (e-mail), purchasing and information (accessing business websites). Of those businesses that use the Internet, 95 per cent do so to access and send emails, followed by 64 per cent that use it for purchasing and 63% for accessing business websites. Transactional activity is common but less so. More organisations buy off the Internet (64 per cent of those who use the Internet) than sell (35 per cent).
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