Credit for small business ‘crucial’

THE head of the Credit Review Office (CRO) has said anything that can get capital moving to the small business community would be welcome, without clearly endorsing the establishment of a state-controlled strategic investment bank — for which opposition parties are calling.

At a sitting of the Joint Oireachtas Committee on Enterprise, Fine Gael and Labour representatives separately made respective calls for the establishment of a “good” asset recovery bank and a state-controlled strategic investment bank, in order to boost competition and avoid the prospect of AIB and Bank of Ireland becoming the only lending prospects to SMEs.

The call for the latter was made by Labour’s enterprise spokesperson, and the committee’s chairperson, Willie Penrose (and supported by Fianna Fáil TD NedO’Keeffe).

While not directly supporting either idea, CRO chief John Trethowan told the committee getting credit flowing to viable small businesses remains crucial.

On banking competition, he noted that, between them, AIB and Bank of Ireland command 60% of the lending market in Ireland, with Ulster Bank controlling 10% — meaning that 30% of borrowers are facing difficulties in accessing new lending, something which is “a cause for concern for the future”.

Mr Trethowan told the committee that activity to date — only 20 approaches from companies unhappy with their recent borrowing attempts have been made to his office — has been “disappointing”.

Mr Trethowan said some SMEs have illustrated a poor use of cash flow forecasting, “something which doesn’t inspire confidence in lenders”.

Meanwhile, the small firm lobby group ISME has reiterated its feeling of “no confidence” in the CRO.

Earlier this year, ISME claimed as much as 80% of its members were unaware of the CRO’s existence, adding those which did held no confidence in it and saw it as being too close to Government and the banks.

The office was established at the beginning of the year, having been initiated in the last budget, as a means of gauging the true picture of lending to small business.

Yesterday, ISME said that the high percentage of companies with no knowledge of the office had only declined marginally in the last couple of months.