51% stated that banks are making it more difficult to access finance.
Businesses waiting longer to access credit
51% have been with their bank for 20+ years.
ISME, the Irish SME Association, released its Quarterly Bank Watch Survey Q3 today (October 3rd). The survey results show a significant increase in refusal rates and also a disimprovement in the time it is taking SMEs to access finance from decision to drawdown. The increase in the number of refusals is a cause of concern.
ISME CEO Neil McDonnell said “Today’s results reflect the disconnect between our pillar banks and SMEs. A 39% refusal rate is high, the highest since June 2016. Banks appear to be regressing; instead of improving access to finance for SMEs, it is becoming more difficult. This was highlighted in the latest Central Banks statistics.”
“51% of respondents stated that the banks are making it more difficult for them to access finance. As we enter into the post-Brexit world, it is vital SMEs are supported in Brexit-proofing their business; this starts with access to finance.”
“Failure to provide access to finance is undermining businesses and putting jobs at risk. The time taken from decision to drawdown has also increased significantly, from six weeks to eight weeks. This must be addressed.”
The main findings from the 528 respondents in the third week of September are as follows:
38% of respondents required additional or new bank facilities in the last 3 months, compared with 34% in the previous quarter.
39% of companies who applied for funding in the last three months were refused credit by their banks, an increase on the 34% in Q2.
Awareness of the Credit Review Office and Credit Guarantee Scheme is at 76%. 68% (58% in Q2) know about the Micro Finance scheme.
20% of applications are awaiting on a decision at the end of August, an improvement from the previous quarter of 32%.
On average, businesses are waiting 6 weeks for an initial decision on loan applications. The wait time for drawdown remains at 2 weeks.
Only 17% of initial bank decisions were made within the first week; a marginal drop from 18% on previous quarter. 28% are waiting 4 to 6 weeks, while 17% are waiting more than 10 weeks
67% of those who required funding made a formal application, an increase from 60% in the previous three months, while informal applications decreased from 88% to 76%.
Of the 61% approved for funding, (8% of whom were partially successful), 54% have drawn down the finance either fully or in part.
There was a slight decrease in requests for term loans at 50% (last quarter 49%), overdrafts increased from 20% to 48% in Q3.
Invoice discounting/factoring increased from 1% to 2%, with 13% requesting leasing down from 22% in Q2.
54% of respondents had cause to be concerned about bank fees and charges.
61% state that the Government is having either a negative or no impact on SME lending, a slight decrease from 65% on the previous quarter.
The Association, called on the Government to:
Ensure that the SBCI funds are promoted by banks.
Finalise the restructuring of the re-vamped Government Credit Guarantee scheme and promote it and the Microfinance scheme.
Ensure honest and reliable reporting from the rescued banks, through the Department of Finance and Central Bank.
Investigate other sources of finance that can be made available to viable cash-starved SMEs.
“If the main pillar banks are refusing to lend credit, then SMEs must look elsewhere for alternative sources of finance. On Friday November 3rd we will be hosting our annual conference in Citywest, where there will be many exhibitors offering alternative sources of finance. SMEs must tap into these resources”.
For further information, please contact
Neil McDonnell, Chief Executive
T: 01 6622755, M: 087 2995658
Note to Editors:
This survey was conducted in the third week of September, covering the three months of June, July and August. There were 528 SME owner manager respondents.