Wednesday 15 August 2018

SMEs condemn State's failure to boost lending

Isme CEO Neil McDonnell
Isme CEO Neil McDonnell
Colm Kelpie

Colm Kelpie

More than half of small and medium-sized businesses believe the Government is having a negative or no impact on SME lending, a survey has found.

At 55pc, it is an improvement from 64pc on the previous quarter, according to the latest quarterly bank watch survey from the Irish Small and Medium Enterprises Association (Isme).

The results of the survey also show a decrease in refusal rates and a drop in demand for credit, while the waiting time from decision to draw-down remains unchanged at six weeks.

Isme CEO Neil McDonnell said that while a reduction in the number of refusals in the first three months of this year is welcome, access to finance remains critical for many SMEs.

"Even when finance is available, it comes at a significant premium to that paid by SMEs in peer countries, and with more strings attached. So even when our SMEs are successful in acquiring credit, they are penalised with higher costs and unjustifiable conditions," he said.

Mr McDonnell said the latest Central Bank SME Market report shows the difference between Irish banks and European banks, with an average charge of 5pc for an Irish SME to borrow €250,000 from a bank, compared with only 3.3pc across most of Europe.

"This differential is significant and must be reduced," he added.

The survey was carried out among 524 respondents in the second last week of March.

Key findings include the fact that 31pc of respondents required additional or new bank facilities in the last three months, compared with 42pc in the previous quarter.

Around a quarter of companies who applied for funding in the last three months were refused credit by their banks, a decrease on the 32pc on the final three months of last year.

SME demand for credit has dropped from 42pc to 31pc, while almost half of businesses stated that banks are making it more difficult to access finance.

The survey findings come just days after the head of the Credit Review Office said banks no longer make the effort to get to know small and medium-sized firms when they apply for loans, and it has long-term consequences.

John Trethowan said bank officials are making loan decisions sitting behind desks rather than face-to-face.

And he warned the closure of bank branches across the country could be the cause of lower demand for SME lending.

In his latest report, Mr Trethowan said a persistent finding in the Department of Finance SME credit demand surveys is that there has been a decline in the demand for bank lending, from 40pc in 2013 to 23pc now.

"I think people aren't borrowing because they find it too hard, and that relationship has been lost," Mr Trethowan said.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business