The rejection rate by banks for Irish SME loans is running at twice that for many other EU countries, according to the latest Central Bank report on small firms.
The gap between how Irish SMEs are faring against larger corporates and multinationals based here has long been under scrutiny. In recent months, SMEs have reported a rise in refusal rates, while major lenders in recent days have said some SMEs in exposed fast-changing and competitive industries are facing pressures.
The Central Bank’s SME Market Report shows Irish SMEs loans are among the costliest in the eurozone. The interest rate charged for loans of under €250,000 stood at 5.2% in March 2018, against 2.6% in many other European countries, says the report. And citing recent survey evidence from the ECB and European Commission, the report finds that “loan and overdraft applications in Ireland remain elevated in contrast to euro area averages”.
However, the rejection rate in Ireland, which was measured at 11.7% in March, “continues to be more than twice the rate experienced” in many other European countries, of 5.8% and 4.4%, it said. Moreover, “Ireland records a higher rate of discouraged borrowers (i.e. SMEs that did not apply because of fear of rejection) for loans (9%)”, compared with many other countries in Europe.
Three main lenders account for the lion’s share, at 86%, of SME loans, the report found. There were €16.2bn loans advanced to SMEs in the second quarter, up 2.7% from a year earlier, boosted by demand from primary industries and hotels and restaurants.