‘Trading conditions improving’ as SMEs seek less credit

Improved trading conditions have resulted in demand for bank finance among SMEs falling to the lowest level for two years.

The latest SME Credit Demand Survey conducted by research company Red C on behalf of the Department of Finance shows over the second and third quarters of this year, 36% of firms requested some form of banking credit; down by 4% on the preceding six months.

The figure are in line with late 2011 demand levels. They have largely been attributed to fewer SMEs needing help with their working capital levels and less need for support finance.

In terms of micro-enterprises, the number of firms seeking support loans fell from 80% to 66%, year-on-year, in the six months of April to September.

Excluding cases that are still pending, the survey showed a 4% rise to 80% in partial or full loan approval rates.

Finance Minister, Michael Noonan said the results show trading conditions are improving for SMEs further indicated by 72% of respondents saying turnover had increased or stabilised over the period in question.

He said the Government “will continue to target initiatives at SMEs to support the upward trend in economic activity”.

The survey was broadly welcomed by commentators and lobbyists, yesterday, though some pointed to a strong representation among agricultural and farming firms skewing the approval rates; adding the high approval percentage is not representative of the SME sector as a whole.

The need for more awareness of non-banking funding sources such as the credit guarantee scheme and the micro-finance fund was also highlighted, with only a low level of credit applications being non-bank related.

“The forecast that in the next six months more SMEs will be looking for credit for investment and growth should have a positive impact on job creation,” Chambers Ireland chief Ian Talbot said.

The Irish Banking Federation echoed that sentiment, while the Small Firms Association though welcoming the report called for more clarification on reasons for credit refusals and expressed concern that more conditions are being attached to approvals.

© Irish Examiner Ltd. All rights reserved

Irish Examiner live news app for smartphones lets you quickly access breaking news, sport, business, entertainment and weather. appstoregoogle play
Irish Examiner ePaper app gives you the entire newspaper delivered to your phone or tablet for as little as 55c a day. epaper

More From The Irish Examiner