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SME groups welcome EU report but warn they are still in 'survival mode'

The EU Commission report found that lending to SMEs still remains weak.

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THE SMALL FIRMS Association has said that while the EU Commission report findings are welcome, “they are nothing new”.

The EU Commission report was critical of many aspects to do with SMEs, stating that lending to SMEs still remains weak in Ireland, while also criticising the SME non-performing loans book.

The EU Commission report was critical of many aspects, saying that SMEs “rely heavily on banks for financing, adding that non-bank sources of finances are relatively underdeveloped.

Financing

While acknowledging that there are some alternatives, including loan funds, the report finds that as “recovery gathers momentum… and as domestic demand recovers, supply constraints are likely to increase unless credit channels are adequately repaired, which is crucial for the growth outlook”.

The report finds that dedicated schemes and funds have been put in place to improve access to finance for SMEs, such as the Credit Guarantee Scheme, the Microenterprise Loan Fund Scheme and three SME funds, but so far, take-up has been low.

Speaking to TheJournal.ie about the report, Avine McNally, Assistant Director of the Small Firms Association (SFA) said that long term financing for businesses is an issue, and while many of the new funding programmes are welcome, some tweaking of the schemes are urgently needed to make them more accessible.

The report also highlighted the role of the Credit Review Office (CRO), which was established at the end of 2009 to mediate disputes between lenders and prospective SME borrowers who have been refused credit.

Appeals

Although positive, the impact of the Credit Review Office appears to have been rather limited to date, said the report, stating this is partly because the number of appeals has been quite small.

McNally said that while the creation of the review office was to be welcome, she questioned whether the service had been adequately communicated. She said she believed there was more of an uptake in the appeals process now as the cap had been made higher as to the loan amount you could appeal.

Ian Talbot, Chief Executive of Chambers Ireland said the report was a lot of “rephrasing” of the same stuff that is already known. He said that there was hope out there that there are green shoots of a recovery showing, but said “political rhetoric” such as tax cuts was concerning.

“The job is not fully done yet,” said Talbot, who said nothing should be done that could derail us off course.

“There is still a lack of confidence out there. Businesses are still waiting on more visible growth,” said Talbot, adding that all was not clear, just yet.

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Survival mode

“SMEs are still in survival mode,” he said.

Speaking about the CRO, he said that it was a bit of a “mystery” as the latest figures show that businesses are more unhappy with the response from banks.

“You have to question why theses businesses aren’t availing of the CRO then if they are unhappy,” he said

Talbot said that nothing should be done to “derail” the progress already made.

However, he said the criticisms and recommendations by the report are not “uniquely  Irish problems”.

Read: The funding ‘hunger march’: over half of companies refused bank credit>

Read: Criticisms of Irish healthcare overspend and unemployment levels in EU report>

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