Saturday 27 December 2014

Small businesses with property loans over twice as likely to default

Published 20/08/2014 | 11:21

The Central Bank
The Central Bank

SMALL businesses with exposure to property are more than twice as likely to default on loans as those without, new figures from the Central Bank show.

The figure stands at over 40pc for those with exposure to property loans compared with just over 20pc for those without.

And property loans at these SMEs account for one third of the outstanding bank suggesting that bigger borrowers are more likely to be exposed.

One fifth of SMEs have exposure to property, the Central Bank said.

Exposure to property loans stood at €21bn at the end of December, the Central Bank said.

The sectors with the highest exposure include business/administration, hotels, restaurants and retail where 30pc to 40pc of the outstanding loans are linked to property.

At least 10pc of firms with bank debt have exposure to property investment at the same bank, with this figure rising to 16pc when including buy-to-let mortgages for a subset of the data.

"Data on loan default suggests that property-related borrowing has had a detrimental impact on firms: SMEs with property-related borrowings have a loan default rate of 43 per cent, compared to 23 per cent for those without property exposure," the bank said.

 

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