Banks refuse 50pc of loan requests from small firms

Maeve Dineen

March 12 2012 04:46 AM

HALF of all loan applications by small and medium enterprises (SMEs) have been refused in the last three months, a new survey claims.

In its latest Quarterly Bank Watch Survey, business lobby group ISME said 50pc of companies that applied for funding in the last three months were refused credit by their banks.

Of those firms that applied for credit, 91pc said the banks were making it more difficult for them to access finance.

Interestingly, half of all requests were for changes to overdrafts, with 53pc for changes to term loans.

Reflecting the increase in interest rates and bank charges and across all sectors of finance, 39pc of the companies questioned said they had experienced an increase in charges and a 22pc increase in their interest rate.

ISME chief executive Mark Fielding said the results "give a lie" to the banks excuses that demand for credit from SMEs is weak.

He said the latest survey confirms the evidence of the recently published Central Bank report and the EU Survey on access to finance in the euro area, which stated that Irish SMEs were second least successful, after Greece, in obtaining bank finance.

"It is obvious that the Government's instructions to the bailed-out banks to increase access to finance for viable SMEs is being ignored," he said.

Cheerleading

"We must put an end to the fiction that bailed-out Irish banks are functioning properly."

Mr Fielding took a swipe at the Irish Banking Federation and said that despite its obvious "cheerleading", access to credit is abysmal, the application process is getting longer and businesses are not being told their rights.

"It is true that the ATM machines are still open but as for assisting the SME sector to grow, as for playing their part in the economic recovery, the banks are simply the living dead," Mr Fielding said.

"They restrict credit lines, delay decisions, miss deadlines and generally hinder progress, while they themselves are slow to reform, re-educate or restructure."

Other findings from the survey reveal an increased demand for funding with 37pc of SMEs seeking bank finance in THE last 3 months, compared with 25pc in same period in 2011.

Just 8pc of those companies questioned believe the Government is making a positive difference to SME lending.

"This Government must desist from empty long-fingered announcements and tackle the biggest threat to the economy from a discredited, non-functioning and self-serving banking sector," Mr Fielding added.

"It is essential that viable businesses are able to access adequate levels of funding to develop and grow.

"The continuous delay in the introduction of the partial guarantee scheme, the microfinance scheme and the strategic investment bank is a disgrace, and a major disappointment for SMEs."