51% stated that banks are making it more difficult to access finance.
Businesses waiting on average 6 weeks from decision to drawdown
51% have been with their bank for 20+ years.
ISME, the Irish SME Association released its Quarterly Bank Watch Survey Q4 today (December 7th). The results show a decrease in refusal rates and in the length of time in accessing finance. The Association welcomes this, but calls on SMEs to diversify their financial options and look to alternative sources of finances.
ISME CEO Neil McDonnell said “The bank watch survey for Q4 ends 2017 on a positive note. The reduction in refusal rates and the time taken from drawdown to accessing finance is welcome. The banks, however, must ensure that this reduction continues in 2018. The 32% refusal rate is still considerably high. Banks could help SMEs improve their application procedures by giving more structured feedback to the domestic market on why applications fail.”
“A credit refusal can forestall growth opportunities. SMEs who fail to access credit from the pillar banks must demand reasons for their failure. Banks must supply them. Half of respondents stated that banks are making it more difficult to access finance. Banks’ attitudes towards SMEs need to change. We are encouraging SMEs to tap into other sources of finance, such as SBCI and Microfinance, as well as peer to peer, discounting, equity and crowd-funding.
The main findings from the 676 respondents in the last week of November are as follows:
42% of respondents required additional or new bank facilities in the last 3 months, compared with 38% in the previous quarter.
32% of companies who applied for funding in the last three months were refused credit by their banks, a decrease on the 39% in Q3.
Awareness of the Credit Review Office and Credit Guarantee Scheme remains unchanged at 76%. 65% (68% in Q3) know about the Micro Finance scheme.
23% of applications are awaiting on a decision at the end of November, an increase from the previous quarter of 20%.
On average, businesses are waiting 4 weeks for an initial decision on loan applications. The wait time for drawdown remains at 2 weeks.
23% of initial bank decisions were made within the first week; an increase from 17% on previous quarter. 27% are waiting 4 to 6 weeks, while 7% are waiting more than 10 weeks
63% 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 68% approved for funding, (18% of whom were partially successful), 53% have drawn down finances either fully or in part.
There was an increase in requests for term loans at 59% (last quarter 46%), overdrafts are down from 48% to 24%.
Invoice discounting/factoring slightly increased from 2% to 3%, with 12% requesting leasing, down from 13% in Q3.
49% of respondents had cause to be concerned about bank fees and charges.
64% state that the Government is having either a negative or no impact on SME lending, an increase from 61% 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.