Firms feel lack of available credit

A THIRD of respondents to a new survey have said that the lack of available credit has put their business at risk of closure.

Just under half of companies surveyed as part of the County and City Enterprise Boards’ (CEB’s) latest half-yearly business survey, said they felt credit availability was worse now than six months ago. The overall sense from the report suggests the credit crunch is worsening and the very future of many companies is in the balance.

“The survey highlights a number of key issues: the significant cash flow difficulties with which many businesses have to work and the continuing lack of access to overdraft and loan facilities from the banks,” said Michael Tunney, chair of the CEB Network. “With customers and suppliers holding on to cash for as long as possible and limited working capital available from the banks, many businesses are struggling to meet day-to-day costs. If the situation continues, many good businesses will be forced to close as a result.”

More than half of those companies surveyed said their business has been curtailed by banking restrictions, but, while 35% have let staff go, only 8% said they have plans to reduce staff numbers.

Meanwhile, two Irish entrepreneurs and business consultants, Robert Cooper and Peter Lawless, have established a new company, called V20:20, which will act as a bespoke strategic planning agency on behalf of, it is hoped, around 10,000 SMEs by 2020. Its aim is to save 200,000 jobs by smartening up small firms so they can qualify for loans by meeting banks’ lending criteria.

According to Mr Lawless: “Businesses are crying out for this solution. In the US and UK they have loan mediators and turnaround specialists working with the banks. Given the international community’s blighted view of Irish banking, this is a solution which is long overdue. Since the Government recapitalised major banks in Ireland and ordered them to lend 10% more to SMEs, the question from the banks has been ‘how can we ensure that we lend only to businesses that will survive and prosper?’

“Businesses will be able to avail of targeted business advice as well as specific sectoral and functional expertise and banks can properly assess SME’s viability and future growth prospects. Thus, banks will be in a better position to extend credit to SMEs who have the right business characteristics to survive.”