SME’s look set to turn their backs on payday loans

It seems that SME’s will not be looking to payday loans to help finance their businesses according to the latest research done by BDRC Continental. This follows an announcement from one payday lender that it will launch a service especially for small businesses.

They are not likely to get many customers from the SME sector as 91% told BDRC Continental that it is either ‘fairly’ or ‘very’ unlikely that they would use a payday lender for credit. Only 6% of SME’s said that it was likely that they would use one. The reasons they gave are three-fold in the main. Firstly there was the cost, which 55% gave as the reason for not wanting payday loans.

Secondly, 31% preferred to stay with their traditional providers and thirdly, over a quarter of SME’s thought that payday lenders have a bad reputation. Spokesman for BDRC Continental, James Dunleavy, said that it is clear that SME’s do not want a short-term fix to what may be a longer term problem given the current economic climate.

He added that payday lenders seem to have mis-read the situation regarding SME’s. Mr. Dunleavy said that businesses are not just willing to finance themselves on any terms. Anyway, the most recent BDRC Continental SME Finance Monitor found that most SMEs were still receiving credit from their traditional providers and Mr. Dunleavy said that this was encouraging for such an important sector of the British economy.

The Q4 2012 SME Finance Monitor looked into the availability of finance for small and medium enterprises in the UK. Nearly 80% of SME’s that applied for either a new or renewed overdraft, received one. And over 60% of SME’s that required a new loan or an extension to an existing loan received one.