SME credit crisis 'will last five more years'
THE shortfall in bank credit for small and medium enterprises (SMEs) in Europe will continue for at least another five years, new research has found.
The study by accountancy giant PwC concludes that firms will struggle to fill this gap using other existing sources of credit as they typically don't enjoy the same level of access to bond markets as their US counterparts.
Declan McDonald, PwC Ireland's restructuring and insolvency partner, said affordable access to credit had always been challenging for SMEs in Europe.
"But the problem is more acute than ever," he said.
"Over the next few years, many SMEs are likely to find the already demanding terms of bank credit expensive and while they will increasingly wish to invest for future growth, banks remain under pressure to reduce and control their levels of leverage.
"So, the scale of the non-bank lending opportunity in Europe is huge, and will only grow over the next few years," he said.
"This should be good news for Irish SMEs who traditionally have been heavily reliant on bank lending to fund their businesses and are now struggling to source investment for restructuring and growth as the economy recovers," Mr McDonald said.
"Already we have seen significant activity in the loan sale market in Ireland and a number of new funds entering the market targeting the SME sector."
The Department of Finance has been in discussions with with German development bank KfW to provide funding to SMEs.