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More than one-fifth of SMEs suffer loan squeeze

Irish SMEs are the second most likely businesses in Europe -- after Estonia -- to have their bank loan applications rejected, according to a stark new survey by the European Central Bank (ECB) and European Commission.

Over a fifth, or 22.6pc, of Irish small and medium-sized companies said that loan applications they made in the past six months were rejected outright.

That was more than twice the EU average of 10.9pc. SMEs in Estonia were only slightly more likely than those in Ireland to be rebuffed.

The survey has highlighted the choking off of bank credit to the Irish SME sector.

Of those Irish SMEs that applied for a new bank loan, or to refinance an existing one in the past six months, only 27.5pc got all they requested, compared to an EU average of 63pc.


The Irish figure was the lowest of any EU member state and even lower than that in Greece, where 29.2pc of such applications resulted in all requested funds being approved.

More than twice the EU average of Irish SMEs are also relying on trade credit to survive.

Figures show that almost 67pc of Irish SMEs have been reliant on trade credit in the past six months as a major source of financing.

That's more than twice the EU average of 32pc.

Details of the survey were released as the EU launched an action plan it says is designed to improve access to finance for SMEs across the trading bloc.

The EU is proposing that a loan guarantee scheme be reinforced and extended to cultural and creative sectors.

Such loan guarantees are available where an entrepreneur or small enterprise doesn't have sufficient collateral and banks therefore refuse loans.


The EU said it will also provide additional funding for research and development business.

The European Investment Bank is also to maintain SME lending at a pace close to that achieved this year, when a total of €10bn in SME loans are expected to have been doled out.

The EU is also making it easier for venture capital funds to raise funds across Europe that will be used to benefit start-ups.

Qualifying fund managers will be able to raise capital across the EU. They won't have to deal with often complicated requirements in individual member states.

The SME survey published yesterday also found that 12.1pc of Irish SMEs didn't bother applying for a bank overdraft or other credit line in the past six months because they believed their application would be rejected.

The average corresponding figure across the EU was just 5.5pc.

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