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More businesses are being turned down for bank loans, says ISME

54 per cent of companies who applied for funding in the last three months were refused credit by their banks.

THE QUARTERLY BANK Watch Survey by the Irish Small and Medium Enterprises Association (ISME) has found that bank refusal rates have jumped four per cent.

In the three months to the end of February 2014, bank refusal rates went from 50 per cent to 54 per cent, which ISME states is very concerning seeing as demand for SME lending is up from 37 per cent in the previous quarter to 39 per cent.


The association expressed concern at this increase, in the light of the recent ending of the requirement to lend up to €8 billion to SMEs and called on the Government to intervene immediately to ensure that SMEs had sufficient access to bank credit.

Last week, UCD Professor Morgan Kelly sounded a warning about the SME sector in a lecture, with Minister Joan Burton stating yesterday that it was something that had been discussed at length, adding that it was vital SMEs get access to lending.

Mark Fielding, ISME CEO said the survey results “paint a bleak picture of the SME lending landscape”. He added:

The speed at which the banks have moved is in stark contrast to their delays in sorting out their balance sheets and expertise gaps.

Have the Government learned nothing from dealing with banks which cannot be trusted.

Other findings from the survey did show some improvements, such as the initial banking decisions being made in quicker time, with 23 per cent getting a decision made within one week, an improvement from the previous 15 per cent.

However, the average decision time remains at 4 weeks.

In terms of what funding customers are asking for, 39 per cent of requests were for term loans, with 43 per cent were for overdrafts, or alterations to existing facilities and invoice discounting/factoring accounted for 6 per cent of requests. Over 12 per cent was for leasing.

Of those surveyed, 69 per cent said the Government is having either a negative or no impact on SME lending.

Fielding added that with such a high percentage believing that the Government has had a neutral or negative impact on SME lending is “an indication of the perception of the performance of the current administration in relation to this problem”.

He said:

Economic progress will not be sustained if SMEs cannot obtain finance for growth.

This trust is clearly misplaced and misjudged as refusal rates have already begun to creep upwards. Talk of a third bank is welcome but more immediate solutions must also be put in place.

ISME is calling on the Government through the Central Bank to investigate the delays in getting SME loan decisions.

“These delays are a cynical method of refusing credit, without actually stating so. Small and medium business owners must not be abused in this manner and the Code must be enforced by Central Bank,” they said.

“The bank system is still not working and the duty of the Government is to see that it is. Any loosening of the control over the banks must be matched by an increase in viable and sustainable SME lending. This is not happening and Government must act,” concluded Fielding.

Read: Morgan Kelly warns SMEs could ‘go under’ taking a big chunk of the Irish economy>

Read: Here’s why one company lets workers look up each other’s salary>

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