Wednesday 7 December 2016

Banks boost lending to small firms

Published 07/03/2016 | 02:30

ISME chief executive Mark Fielding. Photo: Jason Clarke Photography
ISME chief executive Mark Fielding. Photo: Jason Clarke Photography

Small businesses are looking for more and more credit from the banks, and the rate of refusal from lenders is shrinking as the economy keeps improving.

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New figures from small firms lobby group ISME show that demand for bank credit among its members is increasing steadily. That is in marked contrast to the depths of the economic crash, when demand had collapsed and the crippled banking sector was widely criticised for refusing lending to profitable companies.

The latest 'Bank Watch Survey' from ISME found that 41pc of its members approached their banks for a loan between December and February. That compares to 35pc in the previous survey.

At the same time, the banks are approving more applications. ISME claims lenders are declining about 43pc of applications, compared to a 48pc refusal rate between September and November last year.

ISME chief executive Mark Fielding said the improving rate was a good sign, but warned his members still needed more.

"We are pleased to see a small improvement in bank credit refusal rates in this quarter and we hope that this is the beginning of sustained progress on this issue.

"Recent results have seen us take two steps forward just to fall one step back as it seems the banks are not able to deliver consistent improvements in this area.

"This remains a vital issue for the SME sector and will be particularly pertinent as small businesses go for growth, now that we have finally entered a period of recovery," he added.

Mr Fielding added that his members were being asked for significant guarantees when applying for credit and those guarantees were not necessarily being returned after the loan was paid off - something he attributed to "inadequate training of bank staff that do not have the necessary skills and expertise to analyse businesses proposals".

"As a result of this inadequacy and the fear of 'making a mistake', risk is not being properly analysed, personal guarantees are being demanded and loans are being refused," he said.

The Government has put in place a range of aids for small firms but ISME says awareness of these schemes among bank staff remains patchy.

These schemes, such as the Credit Guarantee Scheme and SBCI, must be better promoted, it said.

Irish Independent

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