Thursday 14 December 2017

Dire lending conditions getting worse for business -- EU study

Peter Flanagan

Peter Flanagan

IRELAND has the second-worst lending conditions for small businesses in the European Union, according to a damning new study.

The EU study on competitiveness among the 27 member states found that only Greece had a worse climate for small and medium enterprises (SMEs) trying to get credit. The report also finds that it was nearly two-thirds more difficult for an SME to get credit at the end of 2011 than it was in 2009.

Ireland's challenge is to "improve the prospects of the domestic SMEs", the report finds.

"The sector is held back by weak domestic demand, lack of innovation, problems with access to finance, and rising costs of doing business at local level," the EU claims.

Finance access

"The Government should continue to keep a close eye on access to finance, as improvement in this area is crucial for future growth.

"The lack of domestic demand and lack of finance have lowered the level of investment in equipment, which remains under the EU average," it adds.

The banks were quick to dispute any sense they were not "open for business" while lobby group the Irish Banking Federation said Ireland's situation couldn't be compared to the likes of Germany and other economically strong nations.

"The banks are lending but that is in the context of an SME sector that is under enormous strain economically, many are burdened with huge debts built up in the boom and when business is activity is at an historic low," he said.

A spokesman for Bank of Ireland said the bank had received over 37,000 formal lending applications from SME and agri customers up to the end of August, of which almost 30,000 have been approved to date.

New credit

AIB said it was "demonstrably supporting SMEs and is providing new credit to viable businesses to underpin their growth and sustain jobs".

"The extension of credit on commercial terms to viable SMEs and the consequent growth of the performing AIB loan book are vital to this bank's objectives of supporting economic recovery, and ultimately returning the bank to sustainability and achieving a tangible return for the taxpayer on the capital provided to the bank," it added.

On Monday, the latest report from the head of the Credit Review Office John Trethowan called on the banks to do more for SMEs in need of credit.

"The lending policy has tightened in 2012 for more challenged SMEs and farms. The Credit Review Office cases continue to show that more can be done to assist some of these businesses to obtain loans," he claimed.

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