SME demand for bank credit increases from 31% to 34%.
52% stated that banks are making it more difficult to access finance.
Banks must inform customers about alternative sources of finance.
ISME, the Irish Small and Medium Enterprises Association, released its Quarterly Bank Watch Survey (Q2) today (16th June). The survey results show an improvement in time taken from decision to drawdown of credit, and the demand for credit by businesses. However, the Association highlights its disappointment at the number of bank refusals this quarter. Refusal rates are too high, and more progress is needed.
ISME CEO Neil McDonnell said “Access to finance is in the top three main concerns of SME owners, behind the cost of doing business and Brexit. While we welcome the increase in demand for credit, the increase in refusals from 23% to 28% is a matter of concern.”
“As formal Brexit talks start, it is vital that SMEs are supported in Brexit-proofing their business; this starts with accessible finance.”
“Banks who decide not to provide capital to viable SMEs must apprise business owners of the reason for refusal, and of alternative sources of finance. The lack of awareness among bank staff of SBCI funds and the Credit Guarantee Scheme means that many SME businesses remain unaware of their existence. These alternative sources of finance options must be better promoted, as there is an onus on banks to inform loan applicants of their existence”
The main findings from the 672 respondents in the first week of June are as follows:
34% of respondents required additional or new bank facilities in the last 3 months, compared with 31% in the previous quarter.
28% of companies who applied for funding in the last three months were refused credit by their banks, an increase on the 23% in Q1.
32% of applications are awaiting a decision at the end of May, a significant increase from previous quarter of 20%.
On average, businesses are waiting 4 weeks for an initial decision on loan applications. The wait time for drawdown is 2 weeks.
Only 18% of initial bank decisions were made within one week, a drop from 20% on previous quarter.
60% of those who required funding made a formal application, a drop from 72% in the previous three months, while informal applications increased from 76% to 88%.
Of the 72% approved for funding, (16% of whom were partially successful), 48% have drawn down the finance either fully or in part.
There was a slight increase in requests for term loans at 50% (last quarter 49%), overdrafts dropped to 20% (down from 39% in Q1).
Invoice discounting/factoring increased from 1% to 2%, with 22% requesting leasing, up from 20% in Q1.
48% of respondents were concerned about bank fees and charges.
65% state that the Government is having either a negative or no impact on SME lending, a slight increase from 63% on the previous quarter.
The Association, called on the Government to:
Ensure that the SBCI funds are promoted by banks and used appropriately for SMEs.
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.
“Failure by our traditional banks to lend adequately is concerning. The fact Irish SMEs are paying more to borrow than similar businesses across Europe raises many questions about banks relationship with SMEs. If business are starved of credit, or forced to pay too much for it, they will face unpleasant consequences. We ask SMEs to tap into alternative sources of finance such as SBCI, or the Credit Guarantee Scheme for capital”. Concluded McDonnell.
The survey, conducted in the first week of June, covers the three months of March, April and May. There were 672 SME owner manager respondents, a response rate of 10%. This provides a strong indication of the real SME lending environment.
For further information, please contact
Neil McDonnell, Chief Executive
T: 01 6622755, M: 087 2995658
Note to Editors:
ISME is the only independent voice of Small & Medium business in Ireland, representing in excess of 10,200 members across all sectors. The Association is owned and run by owner managers and is independent of big business, government and unions; the TRUE voice of the Irish SME. www.isme.ie