Majority of loan requests are rejected by banks, says ISME
Published 14/06/2011 | 05:00
LENDING to small businesses is falling despite the banks' claims to the contrary, a new survey has found.
According to the latest Quarterly Bank Watch survey from small firms trade group ISME, 54pc of credit applications from small firms were turned down by the banks during the last three months -- up 6pc on the first quarter of the year.
It is the first time in a year that more applications have been turned down than accepted and is just below the all-time high of 55pc.
The Irish Banking Federation rejected the survey as "misleading" and not providing "a complete or accurate account of the demand for credit". In the three months to June 10, around 56pc of the 882 companies who took part in the survey said they had made formal credit applications to the banks in the last quarter, up from 38pc three months earlier.
Despite the higher number of rejections, the ratio of SMEs who believe the banks are making it harder for small firms to access finance actually fell 7pc to 72pc.
ISME chief executive Mark Fielding said the report was proof that the banks had failed in their remit and criticised the role of the Credit Review Office (CRO), which acts as an adjudicator on SME loans that have been refused by the two main banks.
The CRO's most recent report showed that AIB and Bank of Ireland were on track to exceed their lending targets of €6bn a year.
"The latest report on lending from the credit reviewer has continued the 'smoke-and-mirrors' approach to bank lending figures and gives no clear indication of the 'real new lending' by the bailed-out banks," he said.
"The €8.036bn bank-sanctioned figures (outlined by the CRO) for SMEs was a hotchpotch of new loans and restructuring loans.
"The Minister for Finance must demand that these figures be broken down to judge the banks' performance on 'new and increased facilities'.
"It is not good enough for the Credit Reviewer to gloss over the figures in his quarterly report," he added.
CRO boss John Trethowan did not respond to Mr Fielding's claims.
In his last report, Mr Trethowan called on the Government to commission a survey on bank lending to SMEs that involved all the relevant small business and banking lobby groups.
"Existing credit surveys are being used widely as a commentary on the availability of bank lending. These surveys are not quality assured by any reputable market research organisation and are misleading many businesses into not seeking bank credit," he said.