Sunday 25 February 2018

SME lending falls again as squeeze shows no sign of easing

The credit crunch has shown little sign of easing
The credit crunch has shown little sign of easing
Peter Flanagan

Peter Flanagan

LENDING to small businesses fell again in the second quarter of this year, as the credit crunch showed little sign of easing.

New statistics from the Central Bank show lending to non-financial or property related small and medium enterprises slid 1.4pc between April and June, compared to the same period a year ago. The amount of credit outstanding to the sector is now €1.5bn – 5.8pc – less than this time last year at €25.3bn.

The rate of reduction increased in the past year, having fallen by only 4.6pc between 2011 and 2012.

About €413m was doled out by the banks in new lending during the second quarter, the Central Bank said.

About €57.5bn in credit is now outstanding to SMEs, but in a sign of how heavily small firms borrowed during the boom, over half of that is tied to property.

Some €30bn in all loans to SMEs are property loans and that figure is only reducing slowly as struggling businesses work to repay debt.

Overall, lending to businesses beyond the SME sector fell 2.3pc during the second quarter and by 4.6pc year on year.

This continued the pattern of a shrinking amount of credit being available for business in general that has been an ongoing issue since the collapse of the property market.

The drop was due to a combination of less credit being available and an increase in businesses that are unwilling to borrow in what is still a harsh business environment.

Deposits held by Irish resident private-sector enterprises in banks in Ireland rose by €1.1bn between April and June. While that increase was much lower than at the start of the year, it provides more evidence that businesses are hoarding cash rather than putting it to use.

Some €191bn worth of credit was outstanding to Irish businesses at the end of June, down from €213bn a year ago.

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