LONDON (Reuters) - The proportion of Britain's small and medium-sized businesses (SMEs) borrowing money in the past quarter fell to its lowest level since at least early 2010, a survey showed on Wednesday.
Of the SMEs surveyed by BDRC Continental, 57 percent had neither borrowed, nor intended to borrow money, whilst only 40 percent said they took out some form of external finance between July and September, the lowest since the survey began.
Findings from the survey, commissioned by the Business Finance Taskforce, showed entrepreneurs increasingly felt applications to borrow money would be turned down by banks.
"SMEs seem to be moving away from external finance so we've got fewer SMEs currently using it, fewer that have applied in the past and fewer that are planning to apply," Shiona Davies, Director of BDRC Continental, told Reuters.
"Those who plan to apply are less confident that they will get it, and more SMEs, albeit a minority, now talk about being discouraged from applying at all."
Of all the applications made, 71 percent did result in a loan or overdraft being provided, with less than a quarter of applicants not receiving any form of funding, equivalent to 3 percent of all the UK's SMEs.
But perceptions weighed heavily in the survey, with just a third believing that a bank would agree to their request for finance, the lowest ever level recorded by the quarterly survey.
The survey of over 5,000 small and medium sized businesses was conducted before news in October that Britain was no longer in recession following the strongest growth for five years.
The quarterly SME Financial Monitor also showed a year-on-year decrease in the use of 'core products', such as loans, overdrafts and credit cards, at 34 percent in the third quarter of 2012, compared with 39 percent in 2011.
Looking ahead to the final quarter, Davies said despite reason for optimism, it could take a while for good news - such as the impact of the government's Funding for Lending scheme to encourage banks to lend - to filter through to SMEs.
"Funding for Lending is getting into gear, we're coming out of recession, it's a slightly more stable economic climate and there may be better news generally around Christmas. So you might hope that it would be better," she said.
"A lot of SMEs are one-man bands or very small companies, so they are busy running their business and it may take time for them to become aware of some of the initiatives designed to help them."
Reporting By Costas Pitas; Editing by Louise