Small firms boost as banks approve 58pc of loan bids
BANKS are lending more to small business but it is too early to tell if this is the start of a turnaround for small firms, a leading business lobby group said yesterday.
According to the latest Quarterly Bank Watch Survey from the Irish Small and Medium Enterprise Association (ISME), 58pc of companies had their credit applications approved in the last three months, compared to 45pc during the spring -- the highest since September 2009. That remains a long way below the rate of approvals at the height of the boom, which was about 80pc.
However, ISME chief executive Mark Fielding warned against reading too much into the figures.
"It's a wait-and-see situation. Normally, we do see a higher rate of approval in the third quarter, while there are usually fewer applications made during that time as well," he said.
"While it is obviously encouraging to see the rate of approval increasing, it will be another three months before we can tell for sure if the banks are back lending," he added.
The survey showed a bounce in approvals across the board, with AIB and Bank of Ireland, who between them have about 80pc of the SME market, increasing their lending across all business sectors.
The Credit Review Office (CRO), which was created last spring, reviews and overturns loan applications that have been turned down by the banks. Jim Curran, ISME's head of research, said that the CRO was helping small firms, but a lack of awareness about the office was still holding it back.
"The CRO is a good thing, but only 41pc of business owners we surveyed are aware that it exists," he said.
John Trethowan, who heads the CRO, accepted that his office may have led to part of the increase in credit but believed the improved condition of the banks was the real reason.
"We may have played some part, but I think the main reason is the improved state of the banks. Bank of Ireland, in particular, are well down the road to recovery," he said.
Despite the improved figures, the terms that businesses are being forced to accept are thought to be much harsher than previously. Some 83pc of those surveyed said that the banks are now making it more difficult for SMEs to access finance. Requests for more collateral and demands for personal guarantees have been reported by several respondents, according to ISME.
Mr Fielding believes the only way to guarantee lending to SMEs is to set up a government- controlled bank.
"It is now time that the Government took matters into its own hands and got directly involved in SME lending through the creation of a specific business lending bank," he said.
ISME's survey comes as it was revealed that lending across the EU increased by 2.5pc in August.