Over one fifth (21%) of applications are still awaiting a decision.
At the release of the latest ISME, Quarterly Bank Watch Survey today (7th September), the Association expressed its disappointment at the reduction in successful applications for credit with a 12 point negative change. The Survey had been noting a general improvement in lending to SMEs in the last year but this change is a worrying sign. The hope is that the banks are not reverting to form, with the resultant slowing of economic growth.
Commenting on the results of this quarter's survey, ISME CEO, Mark Fielding said, "After a slow but steady improvement in credit availability over the last two years, it is hoped that these results are just a blip and that the flow of funds into the SME sector will continue. It is difficult to discern a reason for this slow-down as the Strategic Banking Corporation of Ireland (SBCI) has been active in the market since March and demand for bank credit is steady".
"However, the ISME help-line has had numerous calls from SME owners enquiring about the SBCI funds, as it seems that the message has not permeated down through the two banks' management and staff. The need for proper communication and training of bank officials is still an issue with these bailed-out banks and must be improved, otherwise growth will be stalled."
"While the delays in bank decision making have reduced, they are still damaging growth prospects and plans for SMEs. These delays assist the banks' lending statistics but amount to a 'constructive refusal for SMEs. The lack of expertise at branch level is astonishing and here the Central Bank must have a role to demand better training."
The headline statistics are as follows:
41% of respondents had required additional or new bank facilities in the last 3 months, compared with 45% in the previous quarter.
45% of companies who applied for funding in the last three months were refused credit by their banks, an increase on the 33% refusal rate, seen in the previous quarter.
21% of decisions are pending, down 8% from the previous quarter.
28% of initial bank decisions were made within one week; an increase from the 15% in the previous quarter.
On average, the initial decision time has remained at just under 4 weeks. The wait to drawdown has decreased from 4 weeks to 3 weeks.
49% of those who required funding made a formal application, a decrease from 55% in the previous three months.
Informal applications are now at 83%.
11% of respondents who required bank finance did not apply for various reasons, down from 14% in the previous quarter.
53% of respondents are customers of their bank for over 20 years, while 84% are over 5 years.
Of the 55% approved for funding, 68% have drawn down the finance either fully or in part.
49% of requests were for term loans, with 37% for overdrafts, or alterations to existing facilities, while invoice discounting/factoring accounted for 2% of requests, with 12% requesting leasing.
38% of respondents had increases in bank charges imposed. 13% have suffered increased interest rates.
69% state that the Government is having either a negative or no impact on SME lending.
Awareness of government assistance remains high. 76% are aware of the Credit Review Office, while 61% are aware of the Credit Guarantee Scheme and 60% know about the Micro Finance scheme.
62% of respondents are aware of the code of conduct for business lending to SMEs.
The Association, called on the Government to:
Ensure that the SBCI funds are promoted by banks and used appropriately for SMEs.
Increase promotion of the re-vamped Government Credit Guarantee scheme and Microfinance scheme.
Investigate the increasing delays in decisions by the rescued banks.
Demand outsourcing of better management for bailed-out banks to oversee their lending policies.
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.
"All three banks have reported profits this year after their disastrous failures of governance, accountability and management, leading to the bail-out and rescue from the taxpayer. Government must be vigilant that these same errant bankers do not slip back into their old ways and scuttle the recovery. 'They haven't gone away you know'", Fielding concluded.