Over a third of loans to SMEs now in arrears
Published 20/04/2010 | 05:00
more than a third of loans to small and medium enterprises (SMEs) are in arrears and lending to SMEs continues to fall, according to new figures released yesterday.
The latest Mazars review of lending to SMEs, which covers the last three months of 2009, shows that 35pc of the banks' SME loan book is at least 30 days in arrears; with 13pc of loans to small firms more than 90 days behind payment.
Lending to SMEs fell by just over 1pc on a quarter-to-quarter basis, with total credit outstanding to the sector at €32.3bn.
This was the third such survey carried out by Mazars, the international accounting firm. It was commissioned by the Irish Banking Federation (IBF) and reviews the lending practices of five banks (AIB, Bank of Ireland, Ulster Bank, Anglo Irish Bank and National Irish Bank) to SMEs.
There were just over 29,000 loan applications by SMEs during the quarter, 84pc of which were approved by the five banks -- up 2pc from the previous quarter. The approved applications totalled nearly €1.6bn.
The fourth quarter's figures showed a 3pc rise in credit applications compared to the previous quarter.
The overall number of applications, however, has fallen by nearly 50pc since June 2008.
The survey was focused on four main lending categories to SMEs: loans, overdrafts, finance and leasing, and invoice discounting.
The vast majority of lending (€26bn) was in the form of loans.
The number of loans to SMEs that are now in arrears was of concern to Ian Talbot, Chambers Ireland chief executive, and he called for a loans guarantee scheme to help spur growth.
"This (loans in arrears) will act as a dead weight on future loan applications and approvals, particularly when demand for credit picks up as the cycle improves. The Government must respond to help the upswing via an Irish equivalent of the UK's Enterprise Funds Guarantee Scheme," he said
Patricia Callan, director of the Small Firms' Association (SFA), pointed out that while 16pc of formal credit applications are declined, "this figure does not include the number of informal enquiries that are stopped at branch level and never make it to the formal application stage".
ISME, the Irish Small and Medium Enterprises' Association, rubbished the report, with chief executive Mark Fielding describing it as "misleading and dangerous, with the fingerprints of its sponsor, the IBF, all over it".
"As the banks continue to play games with lending statistics, viable SMEs ... are closing due to lack of credit," he said.
However, Dera McLoughlin, a partner with Mazars, rejected ISME's criticism.
"The data for this report is provided by the five banks in accordance with a model developed by Mazars," she said.
"We independently analyse, stress test and assess this data and require the banks to restate their figures if we do not feel the data presented is a fair and accurate picture.
"The IBF's only role was in co-ordinating the process of data provision to Mazars. We firmly stand over the integrity of this report and its findings," she added.